Shares in UK gaming companies have fallen sharply after reports that the UK government is considering a significant tax hike for the gambling industry. According to an article in The Guardian, the government led by Chancellor of the Exchequer Rachel Reeves could consider raising taxes on gambling companies by up to £3 billion (about $3.92 billion). This is an attempt to cover the UK’s £22 billion public finance deficit.
Think Tank Proposals
The proposals to raise taxes on the gaming industry have been put forward by two influential think tanks, the Institute for Public Policy Research (IPPR) and the Social Market Foundation (SMF), and have been backed by Derek Webb, a poker pro and former game developer who is now a Labour Party donor.
According to the IPPR, the UK government could raise up to £2.9 billion next year by doubling taxes on gambling products deemed to be high-risk, such as online casinos. The Small and Medium Enterprises Group is proposing to increase the tax on online gambling companies from the current 21% to 42%.
Stock Market Impact
The news sent share prices of several major gaming companies plummeting. The decline began on Friday and continued into Monday. Evoke shares fell 11% and Entain 10%. Rank Group also fell 7%. Flutter, which owns brands such as Paddy Power and SkyBet, also suffered, falling 5%.
Overall, the value of UK gambling companies fell by more than £2bn on Monday, causing significant losses for shareholders.
Government considerations
According to reports in The Guardian, the Treasury is considering various options for tax increases as part of the Labour government’s first budget in 14 years, which is expected to be presented on October 30. The government is currently examining the possibility of increasing tax revenue from the industry, which generates an annual turnover of £11bn from British gamblers.
Analysts say it is unlikely the government will opt for a bigger tax hike, but warn that the gaming industry could face tighter regulation and higher taxes in the future.
Gaming industry challenges
Gambling Insider has reached out to the Betting and Gambling Council (BGC), the UK gambling industry body, but it has yet to make a statement. At the same time, there is growing concern about the regulatory environment for gambling companies, particularly given the potentially steep tax hikes that could impact their profitability and future investment.
In the wider context, these changes can be seen as part of a wider trend towards tighter regulation of the gambling industry, both in the UK and internationally. For example, in the Netherlands, licensed gaming companies VNLOK and NOGA have expressed concern about the growing amount of money being spent on illegal gambling in the country. Read about Liverpool FC and betting throughout history here - https://www.lfc.se/nyheter/56474/liverpool-fc-och-betting-genom-historien.
Swedish gaming companies also affected
Shares in Swedish gaming companies such as Evolution and Betsson fell on the stock market after The Guardian newspaper published news of the tax proposal. Evolution, which supplies casino software to foreign operators, risks losing revenue if stricter rules are introduced for these casinos. However, Swedish casinos licensed in Sweden are not directly affected by the British proposal. However, the proposal is causing concern in the Swedish market as it could be part of a broader trend towards stricter regulation, which could in turn lead to reduced revenues in the future.
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