UK Gambling Stocks Tumble as Betting Tax Hike Looms

UK gambling stocks have taken a hit following the suggestion that Chancellor of the Exchequer Philip Hammond is set to increase remote betting tax.

Philip Hammond Tax Could Hurt UK Gambling

Chancellor Philip Hammond is under pressure to announce his budget plans as UK gambling stocks take a tumble. (Image: motoringresearch)

Although the Chancellor’s October 29 budget is being kept under wraps, sources close to the government believe the levy for online operators could increase by as much as 10 percent. With the rumour mill turning, many of the leading UK gambling brands have seen their value fall by as much as seven percent.

Hammond Looking to Plug FOBT Deficit

As it stands, UK Gambling Commission (UKGC) licensees pay 15 percent on all online revenue. When the annual budget is announced, the rate could increase to between 20 percent and 25 percent.

Given the current uncertainty, operators are bracing themselves for a potentially tough start to 2019. According to Bloomberg’s October 23 market overview, GVC Holdings shares are down 7.43 percent this week.

Also feeling the pressure under the current weight of speculation are Paddy Power Betfair and William Hill with share prices falling 6.62 percent and 5.82 percent respectively.

At the heart of the proposed tax increase are the impending changes to fixed odds betting terminals (FOBTs). With the upper betting limit being cut from £100 to £2, the government is set lose out on around £250 million in tax revenue.

To plug the gap, an increase in remote betting duty has been proposed, which means it’s up to Hammond to find the appropriate limit.

“A rate below 20 percent for RGD will be sufficient to cover any shortfall from the FOBT regulatory reforms, but there is still a risk that Her Majesty’s Treasury will set it higher to err on the side of caution,” Clive Hawkswood, CEO of the Remote Gambling Association, told Bloomberg.

Increase Could Make or Break UK Gambling

Although a rate around 20 percent would be preferable, the threat of anything more is currently weighing on the mind of UK gambling operators and investors.

“While there is a timing risk that these two changes are brought forward, most likely to April 2019, the main negative next week is if the Treasury sees fit to increase RGD to 25 percent as opposed to 20 percent,” gaming and leisure equity analyst at Goodbody Gavin Kelleher said to Bloomberg.

Whatever the outcome, Hammond is under increasing pressure to act. On one side, the Chancellor is facing internal pressure from a cross-party group that wants to see the FOBT changes and a tax increase implemented immediately.

However, the Conservative minister also has to balance the needs of the UK gambling industry. Too big an increase could cause operators to exit the market and leave an even bigger hole in the country’s tax income.

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