A recent study by the British Lottery and Game Commission (BGC) indicated that the Government ‘ s proposed increase in the lottery tax could result in a decrease of Pound3.1 billion in the industry ‘ s contribution to the British economy. As the Minister of Finance, Rachel Reeves, is expected to announce an industry tax reform in next fall ‘ s budget, the lobby commissioned Ernst and Young to undertake a special study on potential impacts.
There are now over 100 Labour Party parliamentarians and the entire Liberal Democratic Party supporting the think tank SMF and IPPR proposal to reduce child poverty by raising the lottery tax. However, the BGC warned that this would jeopardize jobs, facilitate black market transactions and reduce the contribution of the industry economy, while real tax growth would be far below expectations. According to BGC data, its members currently contribute Pound6.8 billion to the British economy and pay an annual tax of Pound4 billion, supporting more than 109,000 jobs nationwide, including thousands of high-skilled jobs in Stoke, Manchester, Leeds, etc. BGC CEO Granie Hearst stated: “The Tax Increase Scheme has clearly threatened British employment and economic growth. The data is self-evident — tens of thousands of jobs have disappeared and billions of dollars have gone to the black market, with the potential for economic loss of Pound3 billion. Such increases would lead to large-scale closure of gaming shops, casinos and bingo halls, while at the same time facilitating the expansion of unsupervised black market lottery, while the increase in actual tax revenues would be far less than expected.”
Under the current tax system, the gaming company is taxed on the basis of total lottery proceeds (receiving less customer bonus): The rate is 21 per cent, 15 per cent for sports and 20 per cent for air games. SMF and IPPR, on the other hand, propose to raise the online lottery tax to 50 per cent and the sports lottery tax to 25 per cent. The Ernst and Young analysis shows that the implementation of the IPPR programme will result in:£8.4 billion lost in 40,000 jobs to the black market by £3.1 billionAn assessment of the SMF programme foresees:The loss of Pound8.12 million in investment to the black market economy reduced the total value added by Pound2.5 billion, although the IPPR claimed that its proposal would generate Pound3.2 billion in tax revenue, Ernst and Young found that short-term gains were just over Pound1 billion, and that net gains could be less than Pound500 million if they were taken into account such factors as unemployment-induced company tax breaks, reduced national insurance taxes and closure of businesses.
Hearst stressed that “a balanced regulatory and stable tax system can guarantee the development of regulated industries. These proposals not only run counter to the contrary, but also weaken the mechanism of consumer protection — the promotion of clients to black market lottery that lacks regulation, no taxation, no employment and no support for sports.” The British lottery industry is among the highest in the world — creating tens of thousands of jobs, contributing huge taxes and investing in sports. There is now a clear choice: to support a successful, sustainable and regulated British industry, or to assume the risk of unemployment, investment losses and stagnation in development. “The commercial street lottery is probably the first to hit. Betfred warned of tax increases or the closure of all its 1,300 businesses, endangering nearly 7,000 retail jobs. Meanwhile, the Flutter Group has announced that it will close 47 Paddy Power stores, and the Evoke Group is believed to be considering closing some of the William Hill Lottery.