In the face of a looming tax hike, UK gambling companies are battening down the hatches and preparing to ride the storm. The anticipated rumors of an increase in taxation will see many operator restructure and quite possibly start closing shops. Here is how companies have been preparing for the recent spate of changes in UK Gambling Laws.
United Kingdom Braces for the Taxation Hike
Operators in the United Kingdom have come to terms with the fact that they will have to accept the new restrictions on the Fixed-Odds Betting Terminals (FOBTs) which will have a dire impact on the purse of companies that own such gaming products.
Meanwhile, rumors have been long swirling that an upcoming hike in the Remote Gaming Duty is on the cards, which is the government’s attempt to ensure that casino businesses will continue to contribute as much to the coffers as they have been despite the FOBTs legislation, which will most likely lead to severe drop in overall revenue.
The mulled hike is quite substantial, our colleagues from iGamingBusinesss have reported, citing sources that are close to the matter. According to those same sources, the UK Government has been preparing to bring the tax rate from 15% presently all the way up to 25% or thereabouts after the budget meeting on October 29.
According to the Remote Gambling Association (RGA), which reacted quickly to the news that there will be increases in taxation, in order for operators to adapt to the changes, the rate will have to remain firmly below 20%. Otherwise, operators will start losing money on their B2-type machines.
Phillip Hammond Targets the Foreign Operators
Meanwhile, British Chancellor of the Exchequer Philip Hammond has been looking into ways to increase the tax contributions by offshore gambling companies in the United Kingdom. According to the Financial Times, the tax hike would result in £1 billion over five years.
While the move is certainly not good for the gaming industry, it will certainly see Mr. Hammond work around important issues such as the fiscal problems that will ensue from the government’s decision to target the FOBTs in the first place.
As a refresher, it was said in summer that the government would be cutting down the maximum bet that can be placed on one of the machines from £100 all the way down to £2. The move was contested briefly, but then Mr. Hammond confirmed that whatever budgetary problem emerges in the future, it would be addressed somewhere else.
It seemed like a short-sighted move and many argue that indeed was. The changes to the Remote Gaming Duty will certainly put strain on offshore bookmakers. Meanwhile, elsewhere in the United Kingdom, change has been ongoing.
Ireland recently announced its own plans to increase the tax from 1% of the turnover to 2%. This news has forced to LeoVegas and Paddy Power Betfair to both wince at the idea of having to pay higher taxes, especially when Italy is also now officially taking a bearish stance against all gambling advertisement.
Preparing for the anticipated tax hike is important, but there are actual limits that even the most developed casino operators cannot offset by smart business restructuring.
The UK government may want to keep its contributions from the gambling sector intact, but to do so – it would need to ensure that there is some industry left after it’s done taxing it.