An increase in the gambling tax has been predicted to appear in the next budget. Many are suggesting this could significantly impact horse racing. In the following article, we discuss how and why.
On October 30th, UK Chancellor Rachel Reeves will hold a budget. It is expected her government will announce an increase in gambling taxes. This could amount to almost 30%. Many in the industry are worried this could damage horse racing itself. To shield itself, defences are being drawn between the actual act of wagering on sport and the growing online casino industry with its focus on slots and table games.
United Kingdom Gambling Legislation
It is estimated that around 22.5 million people bet on horse racing each weekend. It is feared that anything which could impact that figure could be detrimental to the sport. This could cost jobs and revenue.
Over the past few years, the revenue from UK gambling has been on the increase. The industry is in a renaissance period of sorts. As well as increased interest in sports and making wagers on them, online casinos are also popular. Many of the best casino sites will combine sportsbooks and gaming into one. This means bettors can place a horse racing bet, then skip over using slot games or play poker. By improving accessibility, and customer service and providing bonuses for new customers, people using these services have ballooned. It is estimated that around 32.65 million people in Britain are registered on some form of gambling website, either for sportsbooks, casinos or bingo.
This blurring of the lines is something many in the sportsbook sector want to stop. By drawing a clear distinction between sports gambling and casino revenue, they believe this huge tax burden could be avoided.
Tax Distinctions Between Wagering and Remote Gaming
Currently, all racing profit is subject to a 10% levy. This money goes back to the sport in prize money and funding. On top of this is a 15% gross profit duty. However, for remote gaming, this rises to 21%. It is believed by some that this difference should be amplified, due to the benefits sport, particularly horse racing, can bring to the United Kingdom.
A further levy is also being placed on Research, Prevention and Treatment for problem gambling. This will be provided to the tune of £100 million, which will also be provided by bookmakers.
One suggestion is that the rate could be swapped. This would mean the levy rises to 15% while the taxation drops to 10%. Another is that there should be a straight 12.5% on both. However, with the government looking to fill a hole in its finances, it is doubtful such a lucrative industry will have its tax levels dropped anytime soon.
What Would the Result Look Like?
The fallout has already started in some areas. After reports were made public regarding the changes, the stock markets took £3 billion off the value of British bookmaking and gambling companies. Grainne Hurst, the CEO of the Betting and Gaming Council has warned that further tax hikes could put the breaks on growth for the sector. She also went on to warn that this could “Threaten jobs and completely derail horseracing”. She estimated changes would cost the sector over £1 billion.
Martin Cruddace, the CEO of Arena Racing, has been more receptive to changes in the rates. However, he believes that betting duty should be cut while the statutory levy should increase, which would eventually come back into racing itself. This is to create a growth story reflecting its international status. He also went on to reiterate the distinctions between horse racing betting and the positive impact the sport has on Britain, compared to casino gambling.
The Social Market Foundation is a cross-party think tank that has also weighed in on the debate. Their recent publication states that these taxes should actually double for remote gaming. This would see it hike from 21% to 42%, one of the highest gambling rates on earth. This would generate £900m in revenue in tax. Luckily, it concentrates mainly on the casino sector. With this omission of sports gambling betting, the best-case scenario for the industry could be that this area is overlooked.
This also signals a shift in the thought process of UK sports bodies. If the government has its mind set on extracting tax revenue from gambling, this desire to draw a line between casinos and sports betting could be seized upon. As the sports sector is vital to the UK, there is a certain amount of leverage that can be used to shield bookies, with any damage to them impacting the sport itself.
It also raises the question of how damaging increases in tax will actually be. Since 2019 after previous regulatory changes, 2,485 bookmakers have closed. This is estimated to have been at a cost of 10,000 jobs. The counterargument could be that this has been due to the encroachment of foreign businesses on UK soil.
With casino brands like Bally’s and BetMGM arriving from the United States and weighing in on sports betting, it could turn into an argument of protecting British interests and companies. If these taxes do occur on sports betting, it will take some time before the true implications are viewed and this could mean long-term damage to the sport.