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UK – Bookies and bingo operators at odds over Budget

By - 20 March 2014

Whilst British bingo operators were celebrating following the latest Budget, the bookmaking industry was left facing a huge increase in taxation.

The British treasury has increased taxes on Fixed-Odds Betting Terminals, slashing the shares of bookmakers, whilst halving gaming duty for Bingo to 10 per cent.

Finance Minister George Osborne opted to increase FOBT tax by five per cent to 25 per cent in his annual budget statement. The industry recently introduced its own code of conduct to try and address media hysteria about problem gambling. Analysts believe this change will lead to a significant cost to betting shop operators estimated by the Government to be £75 to£90m per annum once the change is introduced.

Not surprisingly, shares in Ladbrokes dropped by almost 12 per cent to whilst William Hill was down seven per cent. William Hill claims the tax increase would have wiped off £16m from last year’s income.

Investec analyst James Hollins said: “The news is a surprise and a clear negative for both stocks. Ladbrokes will have to change and this is a massive blow, particularly to Ladbrokes, placing significant pressure on group returns, the turnaround of mobile and the dividend that the group had stated was secure for 2014.”

Ladbrokes’ Ciaran O’Brien said: “Today’s announcements mean yet more taxes on an already heavily taxed industry; another £80m to add to the £1bn already paid. The pips are squeaking and we must surely now be given some stability to continue to support our employment and tax base while delivering for shareholders.”

As expected, the Budget confirmed the 15 per cent place of consumption (POC) tax will come in with effect from 1 December 2014. This has huge implications for the online betting and gaming sector.

Barney Horn, indirect tax partner in the Deloitte betting and gaming group, said: “To a certain extent the proposal simplifies the existing rules and ensures all gambling by UK consumers is subject to UK tax, regardless of the operator’s location. However, it will increase operating costs and could lead to further consolidation in the market. Online gambling operators are unlikely to be able to pass on the costs to consumers, but could be forced to cut back on marketing and player promotions. The Chancellor also confirmed the Government will consult on extending the horserace betting levy (currently 10.75 per cent) to offshore bookmakers adding another significant cost to offshore operators receiving bets on UK races.

The good news for the bingo industry was that duty rate will fall from 20 per cent to 10 per cent for accounting periods starting on or after 30 June 2014. This follows a successful campaign by the bingo industry giving a welcome boost to bingo halls. There had been strong rumours the Chancellor was considering reducing bingo duty to 15 per cent, which would have brought an element of consistency to gambling taxes – both betting duty and the POC tax are at 15 per cent. The reduction to 10 per cent goes much further than expected with the Government estimating this will cost the Exchequer £30m for 2014 to15 and £40m a year from then on.

The Rank Group announced plans to open three new bingo clubs after the government halved duty on the game to 10 per cent.

Ian Burke, Chief Executive of Rank, said: “By bringing bingo duty into line with other forms of gaming entertainment, the government has created a basis for renewed investment and innovation.”

The British Bingo Association said the new tax would give bingo clubs across England, Scotland and Wales an extra boost meaning they could now fulfil their commitment to invest in new premises, modernisation and jobs.
The Boost Bingo campaign, run by The Bingo Association, gathered more than 330,000 petition signatures from bingo players across Britain. More than 50 MPs supported the campaign, either in their constituencies by visiting their local bingo club, or on the floor of the House of Commons. ”

Miles Baron, Chief Executive of The Bingo Association, said: “This is the most fantastic news; everyone is absolutely delighted. The decision to reduce duty by 10 per cent means bingo clubs will get an even bigger boost than we had hoped for. I would like to say an enormous thank you to the 330,000 people who backed the Boost Bingo campaign by signing our petition, to the dozens of MPs who visited their local clubs and asked questions in the House, to PLMR who supported us with our campaign, and of course to the Chancellor for recognising the importance of bingo clubs in nearly 400 communities across Britain. Bingo operators identified a programme of investment that would be freed up by a five per cent tax reduction. Now that we have secured a 10 per cent reduction, operators will be relooking at their investment and modernisation plans, to stimulate the industry. Bingo fans across the country will be celebrating today.”

The act of giving with one hand whilst taking with the other has been questioned by some analysts who claim it has led to an uneven landscape when it come sot gambling tax. Mr. Horn said: “Overall, while there has been much talk of simplifying taxes, the position has become increasingly complex with rates for seemingly similar gambling experiences being taxed at different rates. As an example, once the changes have gone through, duty on roulette will be charged at 15 per cent if played on-line, 25 per cent if played on a FOBT and between 15 per cent and 50 per cent if played in a casino depending on the gaming turnover of the casino. All land-based gambling businesses also pay a significant amount of VAT which they cannot recover.”

Even those campaigning against the proliferation of FOBTs seemed unhappy with the tax increase with claims that the treasury is using the tax system for a share in the profits with none of the revenue generated by the tax will be used to help problem gamblers.

Adrian Parkinson, Consultant for the Campaign for Fairer Gambling, said: “A 25 per cent tax rate on FOBTs may well wipe £78m off the bookmakers’ profits – but does little to protect those affected by problem gambling. It will be suggested that this move will slow down the proliferation of betting shops on high streets, but the addictive nature of FOBTs means the bookmakers will still be raking in huge sums. The Government should be looking at dealing with the root of the problem – the high stakes and high intensity play of FOBTs, rather than tax the losses of those addicted to them.”

 

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