The stocks of British bookmaker group Entain and competitor Flutter fell significantly on Monday following rumors of possible tax increases for gambling companies in the upcoming budget.
The uncertainty arose from reports that Chancellor Rachel Reeves is considering a possible tax increase of up to £3 billion for the gambling industry. These plans are based on proposals from think tanks like the Institute for Public Policy Research (IPPR), which suggests doubling the levies for brick-and-mortar bookmakers to 30% and increasing online casino taxes from 21% to 50%. The IPPR justifies this with the rising harms from gambling, which, according to a study by the Gambling Commission, affect 2.5% of the adult British population – significantly higher than the previously estimated 0.3%.
Despite the falling stock prices, Reeves tried to allay concerns. "We are proud of the companies that choose to invest in the UK and create jobs," she said at an international investment summit in London. She emphasized the need for a competitive tax system and highlighted that companies like Sky Bet pay fair wages and provide jobs.
Investors React Skeptically to Tax Increases. Analyst Roberta Ciaccia from Investec called the IPPR's proposals "unrealistic," as they would significantly impact the operators' profitability. "Such a substantial tax increase would nullify the profit margins of most major operators, which earn around 20-25% online and 15-20% from physical betting shops," explained Ciaccia.
The Social Market Foundation (SMF) also calls for an increase in online casino taxes to 42%, which could bring the treasury up to 900 million pounds in additional revenue, according to its own estimates. The think tank argues that online casinos are more strongly associated with harm than other forms of gambling and points to the high prevalence of problem gamblers in online slots.
Simultaneously, Shore Capital analyst Greg Johnson warned of the negative impacts of tax increases on the industry. "A massive tax hike could lead to a decline in tax revenue if many betting shops and online gaming sites have to close," he said. Additionally, there is a risk that players could migrate to illegal offshore providers that do not pay taxes.
The government is currently in the phase of implementing stricter regulations for online gambling, including affordability measures and deposit limits, as announced by the former conservative government last year. These regulatory steps are intended to make the market more challenging and highlight the need for further tax adjustments.
