Shares in Paddy Power owner Flutter and other listed UK bookmakers fell sharply on Monday on concerns that the British government could raise taxes on gaming companies in this month’s budget.
Entain, the London-listed gambling group that owns Ladbrokes, plunged by as much as 14 per cent in early trading after a newspaper report on Friday that chancellor Rachel Reeves was weighing possible tax increases on the sector worth up to £3 billion (€3.6 billion). While they subsequently partially recovered, shares in the company were still trading 7 per cent lower in mid-afternoon in London.
Flutter, which is based in Dublin and owns brands including Betfair and Paddy Power, slipped 4.4 per cent, while Evoke, owner of William Hill and 888, lost 12 per cent. Casino operator Rank Group fell 3.5 per cent.
Entain, Flutter, Evoke and Rank have lost a combined £1.8 billion of market capitalisation.
However, one government figure told the Financial Times that ministers were not planning such a tax raid on the gambling industry in the budget on October 30th.
The Guardian reported on Friday that the government was contemplating an increase in gambling taxes, based on proposals by think-tanks including the Institute for Public Policy Research, which has estimated that the government could raise £2.9 billion next year, and up to £3.4 billion by 2030.
The IPPR has suggested doubling the duty on high street bookmakers to 30 per cent and increasing the online casino gaming duty from 21 per cent to 50 per cent. “Gambling harms are increasing” due to the rise of online casinos, said the report.
It cited new research from the Gambling Commission that found 2.5 per cent of the adult British population may be suffering from problem gambling, “far higher” than previous estimates of about 0.3 per cent.
However, Investec analyst Roberta Ciaccia said the IPPR proposal to sharply raise gambling taxes was “not realistic at all, as it will not allow any operator to be profitable”.
Ciaccia said such an increase would wipe out companies’ profit, as most large operators in the UK generated core profit margins of about 20-25 per cent online and 15-20 per cent from betting shops.
The Social Market Foundation, meanwhile, has called on the government to double taxes on online casino gaming to 42 per cent, a rate it said could bring in as much as £900 million to the exchequer.
The public policy think-tank will issue a report on Tuesday arguing that online casinos are “more closely associated with harm than other forms of gambling”, citing the Gambling Commission’s finding that online slot players are six times more likely to be classified as problem gamblers than the typical gambler.
The report will say British tax rates are often lower than those in other countries, such as France’s online sports betting tax rate of 55 per cent and Austria’s rate of 40 per cent on online gambling.
“We have already discussed these proposals with people in government in recent weeks,” said a person close to the SMF.
Shore Capital analyst Greg Johnson said ramping up gambling taxes could result in lower tax revenues from the industry should it lead to mass closures of betting shops and online gaming sites.
The government is currently in a process to implement tougher regulations particularly on online gambling, including affordability measures and deposit limits, as outlined in a white paper published by the former Conservative government last year.
“The market is already becoming more challenging [for operators],” said Johnson, adding that there was a risk of “encouraging people to move to [illegal] offshore betting sites, which don’t pay any tax”. - Copyright The Financial Times Limited 2024
