A recent number of Labour MP’s are pushing to increase gambling duties in the UK. More than 100 are behind the change but industry analysts are surprised and question the plan as well as the financial projects which would benefit from the money.
The Labour associates say the increase in tax on betting and gaming would bring in nearly £3billion every year which would help to erase the two child benefit barrier. Regulus Partners research firm say the figures just don’t add up, the numbers they have compiled suggests that the changes implemented would generate closer to £2.1bn which is a fair way behind the forecast in the MP’s letter.
One reason for the large difference in the figures is MP’s appear to have included added on measures which were recommended by the IPPR think tank which were raising casino tax bands and increasing Machine Games Duty to 50%. They hadn’t made this clear in their project which gave critics a reason to suggest a selective use of data had been used or a misunderstanding of numbers.
Another substantial concern lies in how taxes would hit betting operators. While MP’s equate higher tax rates with higher revenues, analyst firm Regulus stress that many gambling businesses already work on small margins of roughly 10%. A large increase in tax is likely to bring job losses for up to 80,000 employees, put businesses closures likely and ultimately means lower tax receipts instead of higher ones.
This method from government officials highlights the Laffer Curve dilemma, past a certain point higher tax rates can actually reduce the government’s revenue by pushing businesses to the unregulated market.
The figures that MP’s have used as examples to show why taxes should be higher has also been challenged with them being international ones. In the Netherlands the recent increase in duty coincided with less receipts as customers moved to online casinos that accept credit cards. Pennsylvania and Austria are shown to have higher tax rates but the Pennsylvania 55% duty is only for online slots not the wider betting options. The French government’s higher tax rates have been blamed for the country having one of the largest black markets.
These examples indicate that overtaxing companies only push consumers to seek alternative options abroad which are better value but less safe which undermines the actual goal of increasing revenue.
That being said, the Chancellor now has a difficult decision to make, how does he raise revenue for social policies without dismantling a multi-billion pound industry. Regulus proposes rather than blunt tax hikes the government should look at fixing inefficiencies like how bonuses are taxed which could yield more substantial results.
They also advise that people suggesting the policies need a stronger understanding in business and economic fundamentals. In their view the investment in education for MP’s in finance and maths may produce smarter and more beneficial policy choices.
Beyond the immediate financial debate the issue reflects on a larger scale, how do governments balance social responsibility with economic sustainability. Yes gambling taxation is attractive because it targets an industry of split views of people but the long term effects are job losses, consumer safety because they will go to the black market which is unregulated. This is often overlooked with the eyes being purely on the revenue forecast.
A better method would be to target levies on problem gambling related products such as slots, casino and other gaming areas instead of across the board. The strengthening of regulation to stop offshore leakage and earmarking the gambling tax revenue for public health, education and additional treatment to ensure social benefits.
With such things in place the large tax increases may look good on face value but in practice the Treasury and vulnerable communities are worse off.