Gaming Taxes and the UK Economy: What’s the Cost of Raising the Stakes?

The UK government is eyeing a significant tax hike on gambling, hoping to raise as much as £3.4 billion annually by 2030 by doubling taxes on "higher harm" gambling products. According to proposals from the Institute for Public Policy Research (IPPR), certain forms of gambling — particularly high-risk online casino games — would face increased taxes, while lower-risk activities like the national lottery and bingo would see no changes.

Currently, UK betting and gaming taxes bring in about £3.3 billion per year, with nearly £1.1 billion of that from the national lottery alone. By targeting online casinos and high-street betting, the government hopes to both increase revenue and curb problem gambling. IPPR’s plan includes hiking the remote gaming duty on online operators from 21% to a substantial 50%, while the general betting duty would double to 30%.

This proposed tax increase stems from a growing concern over gambling-related harm, which affects around 2.5% of British adults, according to a recent Gambling Commission report. Online gambling, especially, has shown a stronger link to problem behaviour, making it a prime target for reform. As one IPPR spokesperson noted, this is seen as an application of the "polluter pays" principle — with the goal of encouraging the industry to shift focus toward less harmful forms of entertainment.

Not everyone is on board, however. Some industry experts argue that these tax hikes could backfire. Analyst Dan Waugh from Regulus Partners warns that raising taxes could push consumers to unregulated and untaxed black-market sites, where there’s even less oversight on spending limits or safety measures. Moreover, analysts at Shore Capital suggest that an aggressive tax increase could result in the closure of betting shops and online gaming services, ultimately reducing revenue rather than boosting it.

As the debate heats up, the Social Market Foundation (SMF) has proposed a more moderate alternative. The SMF recommends doubling the online gambling tax from 21% to 42%, which could yield a respectable £900 million without being as drastic as the IPPR’s plan. Countries like France and Austria have set higher tax rates, and SMF believes the UK should follow suit while still maintaining a healthy gaming sector.

Meanwhile, market jitters around this potential tax hike have had real effects. UK gambling companies, including Entain and Flutter, have seen stock prices dip as investors brace for possible government action in the next Budget. However, Chancellor Rachel Reeves has downplayed fears of punitive taxation, affirming that the government values the jobs and investment the gambling sector brings to the UK.

The outcome of this tax debate will reveal much about the UK’s approach to balancing public health with economic interests — and, for students of economics, provides a fascinating look at the use of fiscal policy to help address market failures, market reactions, and the unintended consequences that can sometimes arise from well-intentioned regulations. This itself is a form of government failure.

Glossary:

• Affordability Measures: Policies aimed at ensuring people do not spend more on gambling than they can afford, typically through spending caps or income assessments.
• Betting Duty: A tax imposed on the profits of gambling operators, differing by gambling type.
• Black Market Gambling: Unregulated and often illegal gambling services that avoid taxes and can lack consumer protections.
• Chancellor: The UK government’s official responsible for economic and financial matters, including tax policy.
• Exchequer: The UK’s Treasury or finance department responsible for collecting taxes and managing public finances.
• Fiscal Policy: Government policy related to taxes and spending to influence the economy.
• General Betting Duty: A 15% tax on profits made by UK high-street bookmakers.
• Gambling Commission: The UK government body that regulates gambling to ensure fair play and protect consumers.
• Market Capitalisation: The total value of a company’s shares, used as an indicator of a company’s overall value.
• Polluter Pays Principle: An economic policy where those who cause harm bear the costs of managing it.
• Remote Gaming Duty: A tax imposed on online gambling operators, proposed to rise from 21% to 50% under new plans.
• Social Market Foundation (SMF): A think-tank focused on policy solutions that balance economic and social needs.
• Think Tank: An organization that researches and provides advice on policy matters, often proposing ideas to influence government decisions.

Retrieval Questions:

1. How much could the UK government potentially raise by 2030 by doubling gambling taxes on higher-risk products?
2. What is the current remote gaming duty on online operators, and what would it be raised to under IPPR’s proposal?
3. Why does the IPPR propose to tax “higher harm” gambling activities at a higher rate?
4. Which types of gambling activities are considered “lower harm” according to the IPPR, and would they face tax increases?
5. What are some potential negative consequences of the proposed gambling tax hike according to industry experts?