Insight UK RESPONSIBLE GAMING
Responding to the irresponsible
The UK budget has given to the bingo industry and taken from the FOBT sector, just as machine suppliers have made the most radical changes to the way players interact with these devices and have also pro-actively called for mandatory responsible gaming measures across all machine categories in the UK. Is this a case of a responsible industry faced with irresponsible government actions?
Whilst British bingo operators were celebrating following the latest UK 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, 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.
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Operators 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: “The 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 2014-15 and £40m a year from then on.
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