There is a consultation by the UK Treasury to look at harmonizing taxes on remote (online and mobile) gambling. I prepared this brief explanation on the economics of gambling tax, using Laffer Curve theory. My full submission to the Treasury will be more extensive.

The current taxes of 15% on betting and 21% on gaming are too low, and the differential between the two is too small. The government determined decades ago that horseracing should be supported. The method used is a levy of 10% of gross horserace betting revenue, meaning that it is already “taxed” at 25%.

The bookmakers and their trade body, the Betting and Gaming Council, (BGC) use horseracing to argue against any tax increase. Some in horseracing and the media are too aligned with the bookmakers and will always oppose reforms, regardless of the merits of the proposals.

There are substantial differences in the UK and US markets, but there are global common themes. Operators, their trade bodies and their lobbyists oppose tax increases, whilst offering higher taxes to break into jurisdictions that are reluctant to offer internet gambling.  

The Labour UK 2005 Gambling Act allowed operators to stay offshore, with servers and legal presence outside the UK and avoiding UK gambling and business tax. This unjustifiable dynamic effectively created the acceptance of black-market activity, based on the theory that the gambling was at the server, not in the jurisdiction of the gambler.

It was only in 2015 that a new Act required a Gambling Commission license to advertise to UK gamblers and a “point of consumption” tax was applied. Remote operators had grown exponentially, with the benefit of minimally taxed profits, giving them the potential to become players in the US market when it legalized.