Naive or cynical? The IPPR's proposed tax increases
“Not only is there little robust evidence to suggest that stronger regulation would drive large numbers of people to the illegal market, there is even less to suggest that altering the rate of taxation will do so." – Institute for Public Policy Research (IPPR)
IPPR proposes massive tax hike for gambling industry
Leading UK think tank, the IPPR, has waded in on the issue of tax increases for gambling operators. Echoing (or perhaps driving?) former PM Gordon Brown’s recent comments, the influential policy think tank has called for a massive increase in taxes.
The proposed tax changes are:
- Increasing Remote Gaming Duty (online casinos) from 21% to 50%
- Raising Machine Games Duty (slots and gaming machines) from 20% to 50%
- Uplifting General Betting Duty on non-racing bets from 15% to 25%
Big change, little impact?
Not only are the IPPR’s proposed changes groundbreaking in terms of scale, the institute seems to be suggesting that they will have little impact on operators or players.
Who are, or what is, the IPPR?
In their own words: “IPPR was launched in 1988, with the aim of generating and researching alternative, progressive policy ideas, after a long period in which the UK’s political discourse had been powerfully shaped by a cohort of right-of-centre and ‘free market’ policy institutions. We are an independent charity working towards a fairer, greener, and more prosperous society. We have helped shape national conversations and progressive policy change for more than 30 years. From making the early case for the minimum wage and tackling regional inequality, to proposing a windfall tax on energy companies, IPPR’s research and policy work has put forward practical solutions for the crises facing society.”
A big assumption
“Contrary to previous research, IPPR has found that raising gambling taxes in this way is unlikely to reduce overall government revenue. As duties are based on revenue rather than profit, firms would still pay more tax overall, even if they adjust odds or payout in response the (sic) change. Such changes could increase the taxable surplus, potentially raising tax receipts beyond current forecasts.” – IPPR
And more assumptions...
This IPPR statement is based on the assumption of little operational or behavioural change by casinos or players. They downplay the possibility or likelihood that:
- Significantly reduced profits will impact on an operator’s ability to innovate or enhance its offerings
- Casino closures and job losses
- Operators moving offshore
- Lowered RTP rates and less attractive bonuses and promotions will reduce appeal to players
- Reduced player appeal will lead to players seeking alternatives, including the unlicensed and illegal sector
- Player movement to the unlicensed sector means more risk to the player, lost revenue for the legal, licensed sector and a reduction in what can be collected in taxes
Warning signs overlooked
The IPPR seems to be overlooking a number of indicators around player behaviours, increased regulations and tax revenues:
- The tightening of regulations has driven players to unlicensed markets in neighbouring countries such as Germany, Belgium and The Netherlands
- The Gambling Commission’s own research found a deep-rooted rejection of increased regulation
- The Dutch tax office has forecast a major revenue shortfall. According to Financieele Dagblad (Dutch financial publication), the KSA is expected to announce a shortfall in the region of 25% – equating to around €200m. This is despite a tax increase of 4% (from 30.2% to 34.2%) at the start of 2025. (A further rise, to 37.8%, is planned in early 2026.)
Bold statement? Naive? Foolhardy?
“Black markets will need monitoring but are unlikely to be a major threat.” – IPPR
This seems improbable, to put it mildly. In fact, it seems an incredibly naive statement from a supposedly respected, influential think tank.
Cynical
In the current climate the industry probably needs to understand that it looks like an attractive prospect for a cash grab by a government desperately struggling to balance the books. The IPPR and former PM Gordon Brown (last week in The Guardian and on ITV News) have stated that the increased revenue from a tax grab would go to alleviating child poverty in the UK. This is a highly cynical ploy to tug on public heartstrings and justify what's being proposed. A simple ‘the industry is going very well so we’re going to tax it at a higher rate’ might well have sufficed.
Aim high, accept lower?
You wonder whether or not that behind the scenes Brown et al have reckoned on attaining a certain level of increase but have pitched much higher, thinking that the gambling industry will feel thankful and relieved at the lower (but still significantly increased) level introduced. A case of the lesser of two ‘evils’ getting through?
Betting and Gaming Council response
The Betting and Gaming Council (BGC) was quick to release a statement slamming the IPPR's proposal.
"We completely reject the proposals by the IPPR, which Gordon Brown has based his calls for a drastic tax hike on, and which will only hit ordinary punters. These proposals are economically reckless, factually misleading, and risk driving huge numbers to the growing, unsafe, unregulated gambling black market, which doesn't protect consumers and contributes zero tax."
Final words
This report from the IPPR, supported by former PM, Gordon Brown, and thus, presumably, the current government, reeks of desperation.
It’s hard not to envisage an agenda – a very blatant one at that – at play here. A struggling government, desperate to improve the country’s financial position, identifies a growing, thriving industry which also happens to be an easy target… and bang! It’s simple, whack the taxes up and watch the money come rolling in.
Or is it that simple? Factoring in everything we’ve outlined above the potential ramifications are massive. This will be one to watch in the months ahead.