In a guest post for NEXT.io, Comparasino co-founder Martyn Hannah says plans to hike remote gaming duty in the UK could have disastrous consequences for the industry and, more importantly, players.
If you’re an online sportsbook or casino operator active in the UK market, this week couldn’t have gotten off to a worse start.
As reported by Sonja Lindenberg here on NEXT.io, the UK Treasury is believed to be considering proposals to raise up to £3bn through increased gambling duties on operators.
The news suggests that Treasury officials are evaluating recommendations from two think tanks, with the backing of one of Labour’s top donors.
One proposal in particular calls for a chunky tax increase on the gambling sector, including doubling general betting duty from 15% to 30% and raising remote gaming duty from 21% to 50%.
Unsurprisingly, this led to some pretty heavy headlines in the media about how the change could mark the beginning of the end for the online gambling industry in the UK.
These headlines do hold some truth – a 50% tax would impact all operators, but especially smaller, tier-two sportsbooks and casinos whose margins are already squeezed.
Sure, operators can mitigate some of the tax increase by altering marketing spend, limiting bonuses, tightening odds and dropping RTPs, but this will negatively impact the player experience.
Licensed operators are already struggling to deliver the experiences players are seeking – just the other week, the Betting and Gaming Council issued a report that £2.7bn is staked on black market sites each year.
But pushing players to unlicensed sites is just one potential consequence of a hike in gaming duty – consequences that would likely mitigate the £3bn the measure hopes to raise.
Let’s take a closer look at what these might be.
A mass exodus of online casino brands is likely
Over the past few years, we have seen a major exodus of online casino brands in the UK – this isn’t just small, little-known brands but big names like bgo, ComeOn, Genesis Casino, Mansion Casino and Casino.com.
Multiple factors have driven this – tightening regulatory requirements, nervousness around the Gambling Act white paper, too much competition, etc., but with tiny and shrinking profits making the market ultimately unviable.
To me, this is a crying shame. The UK has long been considered a benchmark for regulated online gambling, but I’d argue it’s no longer seen as a standard setter on the world stage.
A hike in gaming duty isn’t going to improve this perception and will undoubtedly see another round of exits as smaller brands simply can’t justify the cost of doing business here.
Operators will swipe left on the UK
If operators are exiting the market, you can be pretty sure the number of new entrants will dwindle, too. We’ve actually seen a slight uptick in new online casinos arriving in the UK this year – from top-tier brands such as Betano to white labels like Slots Rush and Onyx Slots.
Of course, if taxes are hiked to the extent that the math no longer adds up, operators will simply launch their brands into other markets instead.
Ripples will be felt beyond just online sportsbooks and casinos:
The ripples from a tax hike would be felt way beyond the online sportsbook and casinos it would be levied against.
Online casino comparison sites such as Comparasino would absolutely suffer – not only would we have fewer brands to promote, but I imagine the commercials we work to would be re-evaluated, and not for the better.
Slot studios might find that operators look at their commercials, too, while a reduction in marketing spend would be felt by the countless agencies and specialists that do great work on behalf of their sportsbook and casino clients (let alone the TV, radio, PPC, paid media channels that take their ad money).
Then, there’s the sponsorship of sports leagues, teams and players, and the incredible work that some operators do at a grassroots level – all of this could potentially be at risk should taxes hit the 30% and 50% rates being touted.
The bigger picture
This is why the government needs to consider the bigger picture and, in my mind at least, it likely will.
That’s not to say tax increases aren’t coming, but I’d be surprised if they were at the percentages that have been suggested. At the moment, this is just a proposal from a couple of think tanks that the government is considering.
For me, the bigger concern is that the industry is seen as easy pickings simply because it has given rise to some of the biggest and most successful companies the country has ever seen.
To target these companies in such a way fails to recognise just how pioneering many have been, and how to this day they continue to push boundaries when it comes to technology, entertainment, compliance and responsible gambling.
These are companies that have been deeply committed to the UK, companies that employ thousands of people, bring innovation and growth, and ultimately pay their taxes. But hit them too hard, and I can’t see a compelling reason for them continuing to do so.
Martyn Hannah is the co-founder and managing director of online casino comparison site, Comparasino. He has spent more than 10 years in the industry, first as an editor for EGR and then as a marketing consultant for operators and suppliers. This experience allowed him to launch Comparasino, a comparison site with a powerful recommendation engine that allows players to find online casinos and bonuses based on their preferences.
