iGaming Daily

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In a somewhat predictable development, UK gambling faces a cold autumn as this weekend news broke that reformist think tanks have urged Chancellor Rachel Reeves to squeeze sector taxes. One think tank proposes to double tax on high-risk gambling segments, whilst the other takes the blunt measure of doubling tax on remote gambling from 21% to 42%. Led by the Bettingham Gaming Council, the industry has decried that think tanks are by recommending policies that threaten the jobs and economic output of a tax-effective sector which has yet to secure its regulatory settlements. All eyes will be firmly fixed on 30th October as Reeves presents the Labour government's first budget in 14 years in which the Treasury had prioritised filling in a $22 billion black hole for public services and to lower inflation at a 2% rate. I'm Ted Orme Clay, editor of Payment Expert, and I'm here with my fellow editors, Ted Memier and Joe Streeter, where we're going to talk about these new proposed tax hikes. First, of course, a word for our sponsor Optimove, the number one CRM marketing solution for the iGaming market. Right, okay, lads, let's dive into taxation then, I guess. You guys are the ones who broke the story. Could you just give me and our listeners a bit of a recap? How did this story break and what is the relevance of it? Okay, so on the close of Friday, the Guardian published that two think tanks, closely attached kind of gambling policies had recommended essentially a doubling on remote taxes. The article disclosed that reformist think tanks of the Institute of Public Policy Research, the IPPR and the Social Market Foundation, who have previously called for the UK They urged Rachel Reeves, the new chancellor of the Exchequer, to increase taxes. The IPPR effectively wants to double taxes on riskier or game segments classified as riskier, and the SNF simply called for a doubling of taxes from 21% to 42%. I think that this is an article that you're going to... You have to read closely in the way it's written and the way it's structured. It doesn't name direct sources, but the Guardian states that taxes are definitely on the roadmap for UK gambling. It's a very broad interpretation of the fiscal sensitivities of taxing any sector. That would be my interpretation of it. That's what I would say to the audience. It doesn't state that we are getting definitely taxed. That's interesting, Ted. I guess two interesting things from the backdrop of this story are that the first one is it came during the, or on the cusp of the investment summit in the UK. Labour's really looking to build this relationship with business and have an economy that enables business to continue to thrive. Obviously, this tax will potentially hinder country's biggest businesses in terms of betting. This tax will obviously hinder the betting business severely. Also, maybe they've taken a page from the book of the French government and Michel Barnier, who we know that taxes are being raised significantly in France to a similar level to what they're being touted in the UK. Maybe something they're looking at, maybe they will cast an eye on that. that country as well. And obviously, as I mentioned in the introduction, it's obviously, it's October, we've got the autumn statement coming up on the 30th October. Is speculation of tax increases becoming a bit of an industry ritual? It seems to be quite a regular discussion we have year over year. Yes, and to an extent it can be expected. Look, there's always speculations of tax being increased on sectors such as gambling, tobacco, alcohol. But I'd still say or tell the audiences to look at the way the article is structured and it's written in a very speculative manner with regards to Labour's approach to governing gambling overall. Since the election or since taking government, the Labour government has stuck the script of letting the gambling review conclude and actually settling the new terms for the industry. possibility of a tax increase. I think you've got to separate that out from what the article states that it is actually facing a doubling of taxation. That is the fiscal nightmare of leadership, that kind of handling of an instant doubling on tax duties, and it would have consequences across the value chain and the growth profile of the industry. raise a valid point and a really good point as well at the top of the show with the intro, that the timing of this probably, you know, it couldn't be more tricky for the industry as we adjust to, you know, white paper implementations, new regulatory framework, a doubling of tax at this time would be really challenging. And from a political point of view, I just wonder if the Labour Party regret not having a budget earlier on in their kind of premiership. to kind of assert their fiscal policies on the UK prior to this budget and prior to kind of diluting maybe some of the speculation that has been around some industries. Yeah, I think the budget will certainly be interesting to look at, to keep an eye out for a number of reasons. Not just because of this sort of speculation around the tax here, but on my side of things in payment expert it will be interesting to see what any sort of investment plans they might have, things like that. Obviously, Labour as well have been trying to, throughout a lot of the election and into the early stages of government, have been trying to portray themselves as like the party of business, haven't they? And sort of building up links there. So it'll be interesting to see what happens on the 30th of October and how that could impact this ambition of theirs. But anyway, sorry, I went on. No, no, we had the investment fund as well announced by Rachel Reeves. Yeah, just today. Yeah, yeah. Of course. was it the National Wealth Fund and the British Growth Partnership, wasn't it? Which are clearly linking in with that sort of ambition. I guess they just underline the focus is aiming to be on business and on business growth. Yeah, exactly. And I think we can definitely expect them to double down on that on the 30th of October. Obviously it just also depends on whether it's also going to come with some of these potential tax rises for business as well. And as Ted has pointed out, that wouldn't just apply to gambling either. Sorry, my little political economic rant aside, I'll try and refocus us back on the conversation. So could you just give us an assessment of the worst case scenario, as it were, in the event these think tank recommendations are taken on board, what would be the most painful outcome for the gambling industry, do you think? Okay, so in first analysis, the think tank's policies push remote gambling tax to a real tax charge. for the business at plus 50%. And that would put it in the top echelon of European gambling jurisdictions alongside Germany and Poland, who, as we've all kind of reported on, have got very, very limited and restricted markets. So once you get past the 50% tax charge, it really changes kind of all dynamics at play of your gambling market and what it offers to the consumer. I can comment on the sportsbook level, it would mean a worsening of the overall product quality, a really limiting down on secondary markets and revision across all cost controls. For a sportsbook, you'd be looking at less markets, less data rights, less APIs on individual markets, and thus a significant reduction on the markets that you're offering to the customer. Again, going back to Germany, that's pushed up. Germany sees its kind of channelization rate at the moment. It's got a huge exposure of 50%. So that equates to for every euro spent in the market, 50% goes to the black market. However, the other kind of big factor here is that you're imposing kind of this taxation rate at a growth market. UK still growing. gambling PLCs enter another period of reorganization and you have to factor in job losses and the actual productivity of the market, which at the moment is going through a growth stage online. That would speed up the dynamics of how companies transform. The impact would probably lead to high street closures as operators. throw their chips online and say, well, that's the growth segment. That's where we're going to focus on. Yeah, there's really not a lot to add there, Ted, but I kind of echo your sentiment and I kind of agree that there could be an exodus of operators from the UK, particularly smaller operators. And I think in turn that would lead to a negative effect for players. There'll be a far less competitive market. I think we've seen some reaction from analysts. that just kind of call the potential tax rises excessive and just really highlight the significant detriment they would have on the overall UK market. Yeah, I think potentially even eradicating any levels of profitability from the UK market, per some estimates, which is obviously of grave concern for operators looking to kind of thrive in the UK market. And also for... For the black market as well, as you said, it would fuel black market growth like we have seen in Germany, which is deeply concerning, which I think is what prompted such a fiery response from the BGC yesterday. You know, really taking aim at fantasy economics that are at play when it comes to putting forward these proposals. I find it interesting how Germany has panned out over the years since the re-regulation a couple of years ago. As you guys said, it's often used as the example of how you don't want your market to develop in some cases as a result of taxation and strict regulations. I think it's probably about time we took a quick break and then we'll be back to dive even deeper into a bit more of this. And we're back to this episode of iGaming Daily, sponsored by Optimove. I'm Ted, I'm here with Ted and Joe, and we're going to talk a bit more about the, sort of, the Labour government's financial policies, I guess, and how this is impacting the gambling sector. We've been very, yeah, Times-esque, Economist-esque today. So we'd like to dream. So obviously we've talked a bit about the budget that's coming up on 30th October, some of the stuff we might... expect from Chancellor Rachel Reeves and the Treasury under the Labour government. Ted, can we just come back to you on this? How significant is this budget and what will it tell us about our newish government? Well, it's a brand new government and this budget will outline the fiscal strategy of the Labour government and how it really differs to the Conservative government's approach with the generational and structural issues of the UK economy and its outlook. Regent Stalmer have pledged not to rise taxes on working people, small businesses. That is their pre-campaign promise for income tax, national insurance or VAT. But you have to consider the backdrop of the UK economy and of the government itself. It's been an awful first 100 days in government for the Labour in which the party is petrified of putting forward any fiscal measures that might be perceived or deemed as come back to austerity. So, for example, look at the debacle over the year with the fuel allowance. The backdrop is you've got a government facing a 22 billion pound deficit. But overall, that kind of requires fiscal measures above just taxing individual sectors such as gambling or alcohol or tobacco. For me, the big calls are for the autumn statement will be on whether they were presses ahead with an increase on capital gains tax, inheritance, and closing the loopholes on big businesses, big business and non-dom statuses. And those are the kind of areas where the budget will be assessed or where the budget will have the most impact. Ted, is there a danger that amidst those kind of, the sea of potential new measures there that you mentioned? the real headline grabbers, mainstream headline grabbers anyway. Is there a danger that this tax on gambling, or even if we don't go as far as the proposals that were mentioned, an increase on the tax on gambling is kind of seeing us a bit of an open goal? It's not going to grab major headline, but it will, it could be a lucrative tax as you say to to fill some of this £22 billion hole that is so well documented since they've come into office? Yeah, I actually agree with that. Because I think once the statement comes out, I mean, the way it gets revised, if Rachel Reeves puts in, you know, whatever type of tax increase, you know, whether it be one or two points, right, it really just gets washed out the next day on what were the major tax measures. And also, I think what the UK media and kind of the political spectrum is that we've had a whole general election of how do we kind of kickstart the UK's economy and its economic profile, you know, recovering from what had been a very poor conservative government. And Labour really didn't answer that in the election. So I think the pressure is on Reeds to actually put in some comprehensive policies and stuff that actually business kind of reacts to and says, okay, these guys. Well, they're changing government, but they've also got a brighter picture of where the UK economy is going to be in the next four or five years. It's been a very, very conflicting decade for British sectors, manufacturing, creative sectors reacting to Brexit, exports, imports, across the value chain of the UK economy. It really needs a stabilizing plan. I don't think they're going to go tax heavy on industries because of that. I think this is much more about the and the internal strategy of where labor views the economy and where it wants economy to be in four years. Again, so much has changed. I don't think that Keir Starmer can point back to the last time labor were in government, right? It's a much, much tougher condition out there and I think you've got a much more realistic government of what it can proceed with and what its kind of open goals are. Nice one. Thanks, Terry. good breakdown from our SBC's resident political pundit. No, I'm in all seriousness, no I think that's a completely groovy point there. Yeah, I think that was a solid summary of that. I'm just conscious that we're probably starting to run out of time. So, just got one more thing for you guys here. Regardless of these potential tax changes, obviously 2025 is going to be a tough year. It's going to be a year of adjustments to the gaming industry anyway, right? As you said earlier Ted, Labour seem to be committed to just letting the gambling act review run its course, but follow the same sort of trajectory that it has been for the same amendments and reforms to come into play. So yeah, regardless of these tax rises, it's still going to be a big year of change for the industry, isn't it? Yeah, because I think it always comes back to gambling review and the dependent settlement. So adjustments are already written in across the board for UK gambling. If you even look at every entrance statement, they're all detailed, high and high year on year costs, and those are likely to continue to 2026 and even 2027, right? The only conclusion that I've just been about just outright adjustments for UK gambling. And I also think that you can no longer just think about these changes on a yearly basis. I think if you're a gambling PLC, you have to take each regulatory settlement and you have to book that in a period of three or four years to account for the real cost of what has happened to UK gambling. Thank you Ted. And yeah, Gerrard, is there anything you want to close on there at the times they are a change in for gambling? Yeah, it's a good way to close. I like that line. But yeah, it is interesting times. It will be interesting. Obviously, we've got the Q3s coming up from some of the big UK operators. So it'll be interesting to see if we hear any feedback from them, any kind of backlash, or if they kind of let the BGC do their talking, if you like. But yeah, it's already a period of transformation. We're already transitioning. the industry is getting used to and preparing for the white paper changes. So, to really clamp down on the competitiveness of the market with such increases in taxation would be incredibly detrimental. But we wait and see. We wait to see if there are any tricks or treats for the gambling industry on the October 30th budget. I think that is all today but thanks so much for going over this with us guys. Obviously quite a meaty topic but I think it's been broken down pretty thoroughly here. Obviously to all our listeners please keep an eye on SBC News and Casino Beats for more updates in this area and stay tuned for the next episode of Our Gaming Daily. Thank you.