As raising gambling taxes in the United Kingdom seems all but inevitable, the Betting and Gaming Council (BGC) has commissioned a new study from PwC, which has once again highlighted the supposed link between levy increases and black market growth.
Black market to gain teeth if UK raises tax, study says
According to the study, aptly called "Impact of the taxation and regulatory environment on European online betting and gaming markets,"higher taxes have usually resulted in a larger share of players migrating to the offshore gambling market, which often lacks player protection.
The study argues that markets such as Spain and Denmark maintain lower overall gambling taxes, resulting in about 11% of offshore gambling activity. In contrast, those that employ higher taxes face much greater outflows of players and gambling spending, with France leading the way, at around 53%.
The report further seeks to assess the current situation, based on which only 5% of the total online betting and gaming activity in the United Kingdom is presently channeled through offshore gambling websites.
In its assessment, PwC has stated that higher effective tax rates and tighter rules consistently undermine the regulated market’s ability to compete with the offshore market, thereby losing more players to it.
Another issue that the report challenges is whether increasing taxes actually leads to higher tax contributions, based on a comparison between low-tax and high-tax jurisdictions. The report analyzed tax receipts between 2019 and 2024, finding that jurisdictions with tax rates below 25% saw an average annual growth of 13% in tax contributions, compared to 9% in those with higher rates.
Learning from other jurisdictions’ experience
BGC CEO Grainne Hurst has commented on the results, sounding an alarm about an imminent tax rise in the United Kingdom, and trying to communicate to lawmakers that, according to the trade group and now the PwC study, the impact would be the opposite of what legislators intend.
"Britain has one of the safest gambling markets in Europe but if the Treasury isn’t careful, we could quickly end up like France or Sweden, with huge black markets contributing nothing in tax, offering zero player protection, and providing no funding for sport or the economy," Hurst explained in a statement shared on the BGC’s website and commenting on the outcomes of the study.
Already, betting shop operators in the UK have said that they would simply shutter their physical locations and focus on digital products instead. In the process, thousands of jobs are set to go overnight as well, which will have an immediate and far-reaching economic impact.
