Gambling tax revenues – government balancing act or dilemma?
Around the world, gambling revenues are increasing, and this increase is especially pronounced in online slots. The implications of this trend are varied, affecting both individuals and organisations.
As, quarter by quarter, gambling revenues rise, so too does much-needed tax revenue. However, as more people are gambling, some degree of increased problem gambling also seems inevitable.
The proportion of problem gamblers within the wider population may be tiny, especially in the UK, but there’s an inherent conflict of interests here. Whilst increased tax revenues are good news for economies, governments must strike a difficult balance when it comes to curbing problem gambling.
Slot Gods' Joseph Lee looks at the delicate balancing act the UK government needs to play.
What the numbers say
In the United Kingdom, the Gross Gambling Yield (GGY) has been increasing for the past few years. Between April 2022 and March 2023, the UK GGY saw a 6.8% increase, reaching £15.1 billion, according to the Gambling Commission (UKGC). Between 2021 and 2022, this increase was at 10.9%.
In the US, gambling is at an all time high. Sports betting in particular, which was legalised in some states in 2018, contributes greatly to the government’s coffers. In 2023, the total wagered on sports in the US crossed the $100 billion mark for the first time. This produced around $1.8 billion in tax revenue.
Regional trends
Similar trends can be seen in Europe with gambling revenues increasing exponentially post-Covid. For both Italy and Greece, more than 1% of GDP can now be attributed to gambling. Italy has one of Europe’s largest gambling markets, which makes up about one fifth of Europe’s €108.5 billion gross gambling revenue.
These figures illustrate the increasingly vital role that gambling plays in the world economy.
Increased gambling: both sides of the coin
Average losses
When examining and comparing average gambling habits of different countries, Britons have relatively low loss levels per capita. Ireland, however, is another story, with one of the higher levels of gambling losses per resident.
Australia is an interesting case. Although culturally similar to Britain in many ways, Australians have the highest per capita gambling losses in the world by quite some distance.
The point is that, in different countries, people gamble differently, and therefore different levels of intervention are justified. Considering Britain’s position in the average loss rankings, the UKGC can afford to allow the industry a bit of breathing room.
Regulation effectiveness around the world
The approaches taken by regulators differ greatly, as do the results.
Australia, as mentioned, has a massive gambling culture, especially when it comes to ‘the pokies’ (slots). Australia makes significant harm reduction efforts. However, it has been suggested that the conflict of interest caused by huge tax revenues has led to a lax approach to non-compliance.
The Nordic model
In Nordic countries, gambling is strictly regulated, with much of it being state-operated. This model means that gambling revenue is automatically redirected into public services. As effective and fruitful as this may sound, it has driven many players to illegal operators.
The US
The US Supreme Court legalised sports betting in 2018, and it has since generated huge revenues for the 30+ states which have introduced it. Casinos in America draw hugely on tourism. However, an alarming pattern has also been observed; lower-income populations are far more at risk than others, raising ethical concerns.
These examples illustrate the variety of approaches that regulators take, and the equally varied outcomes. Regrettably there is no one-size-fits-all approach to gambling regulation.
Saving face?
It’s an unfortunate reality that governments benefit from being seen to be doing the right thing. Ultimately, with any governmental intervention, an amount of fence-sitting seems inevitable. Whilst we all want to see people protected, the state relies on gambling revenues.
Contradiction at play
This contradiction can be seen plainly in regulations. For example, the UKGC is introducing a mandatory levy to replace the voluntary one. The latter was abused by some operators, only contributing a token £1 annually. The new levy forces operators to contribute to the running of support organisations and healthcare.
Considering the levy doesn’t actually discourage gambling in any way, this illustrates how efforts to protect individuals are at odds with the government’s dependence on funds generated by gambling.
Job creation
One often-overlooked aspect of economic growth is job creation. The thriving gambling industries of the world are creating countless jobs for both the skilled and unskilled.
The UK is home to thousands of brick and mortar (physical) gambling premises, not to mention the many online operators, technicians, statisticians, software designers, security specialists and creatives involved in designing slot games and maintaining casino sites. Betting and Gaming Council (BGC) members alone employ some 55,000 Brits.
Job creation helps to keep unemployment rates down, reducing the number of people who draw benefits from the system, thus supporting the country’s overall economy.
Social benefits
It’s not only gamblers and operators that benefit from a healthy gambling economy; there’s a strong ripple effect to consider, and the wider social benefits are considerable.
Many aspects of the UK’s systems are indirectly funded by gambling tax revenues. From the NHS to education, taxes collected from gambling operators and casinos benefit everyone.
The Lottery
Another direct example of this effect is the National Lottery, which funds a wide range of good causes. These span heritage preservation, sports, culture, arts, community projects and more – not to mention the thousands of individuals who have won significant, life-changing amounts.
Rising gambling-related harm
Unsurprisingly, an increase in the number of people gambling also means an increase in the number of those with problematic gambling behaviours. Problem gambling can be devastating for individuals and their families, and it is vital that governments and their agencies deal with increased gambling in a responsible way.
Support at hand
British gamblers have a wide network of support organisations to fall back on if they need help. These include GamCare, GambleAware, NHS services, and charities like Gordon Moody. These organisations provide vital services, and they do a great job.
Rising numbers of problem gamblers would mean an increased strain on these organisations, and their funding requirements would likely increase. Fortunately, the incoming mandatory levy will direct funds towards these organisations.
Individual freedom
Reducing problem gambling means increasing regulation. Tightening the rules is typically met with resistance from gambling operators, their representatives (such as the Betting and Gaming Council), and players themselves.
To over-regulate is to encroach on individual freedoms. Regulators around the world walk a fine line between looking out for the public’s interests without imposing on their rights to enjoy gambling for entertainment.
Regulation
Regulators occasionally undermine themselves, causing the public to lose faith. A recent example of this is when the UKGC was caught red handed burying survey data that did not align with its narrative. The data indicated that many players would reject background checks, and the Commission swept this under the rug, until it was uncovered by a Freedom of Information Request.
This sort of thing indicates weakness and hypocrisy and shows that governments are sometimes willing to put their priorities above individual freedom or public opinion.
The anti-gambling stance
Raising awareness is half the battle, and many organisations work hard to keep players informed and equipped to deal with problem gambling. A prime example of this is Safer Gambling Week, run by the Betting and Gaming Council (BGC), which has been a quantifiable success.
The UK has a number of vocal anti-gambling organisations who also work to raise awareness. Some of these have proven to be influential and have had a strong positive impact.
Over-reaction unhelpful
Others, however, take a more extreme, fundamentalist stance on gambling, loudly declaring that all forms of gambling are bad. Unfortunately, this approach is unhelpful, unrealistic, and plagued by exaggerations.
It’s important that the gambling industry acknowledges the hard work done by those on both sides to raise awareness of, and reduce the prevalence of, problem gambling. It’s also important that extreme biases and virtue-signalling are acknowledged for what they are and not indulged.
Over-regulation and illegal gambling
A key concern for regulators in many countries at the moment is unlicensed betting sites. These illegal operators have, in some territories, drawn huge numbers of players.
The main concern is that over-regulation or hasty, ham-fisted policy-making will drive players to illegal sites, where they will no longer have to deal with stake limits, background checks or other restrictions.
However, these sites will not contribute to the levy fund. They may not pay taxes. Some of them have even employed such aggressive marketing strategies as deliberately targeting self-excluded (and therefore vulnerable) players. And in some extreme instances players may never see their winnings.
Unlicensed slots; risk to players and major revenue loss
In Germany it’s estimated that around 80% of its slots play is being accessed offshore, drastically reducing gambling tax revenues. Similarly alarming numbers of Dutch and Belgian players are taking to the black market.
For the time being, that figure is around 2% or 3% for the UK, but this could take a sharp turn for the worse if the regulator doesn’t tread carefully. The UKGC must observe the patterns seen in other territories, and accept that even regulations with the best intentions can cripple the industry and put vulnerable players in an even more vulnerable position.
The internet is a wild frontier, and there’s no simple answer to tackling black market sites, but regulators should seek increased legal powers and work closely with search engines, law enforcement and internet service providers. Player education also plays its part.
Summary
There’s a curious contradiction at the heart of gambling law. The brutal reality is that it seems there has to be an acceptable level of harm. To take every possible step to reduce problem gambling would have catastrophic effects, not only on the industry or the economy, but also on players.
Gambling is a personal choice, and individual freedom is something held in high regard by many people across many cultures. Evidently, imposing on players is not the answer to the government’s dilemma.
The government faces a significant challenge in striking this balance, but examination of both sides makes one thing clear: over-regulation has the potential to be every bit as harmful as under-regulation.