Treasury Committee: How much revenue would a gambling tax rise really raise?

A UK Treasury Committee heard both sides of the taxation argument at the House of Commons, with members of the SMF and IPPR joining BGC CEO Grainne Hurst and Stephen Hodgson, Chair of the BGC Tax Committee.

Stewart Kenny, retired Co-Founder of Paddy Power was another speaker, and he expressed passionately his view that certain forms of gambling ought to be taxed at rates equivalent to the social harm they are said to cause.

In fact, Kenny, who claims he regrets some of his long career in betting, said if the panel took one lesson from his words, it would be that there are huge differences between forms of gambling.

Carsten Jung and Dr Theo Bertram both agreed that differentiation between online slots for instance and betting on horseracing is vital to understand, with the SMF ranking types of gambling based on the level of harm they produce.

While the arguments in favour of raising tax discuss both the need to reduce gambling harms and raise more funds for the exchequer, the committee discussed the idea that an increase in taxation may only be able to achieve one of those aims, and clarity is needed.

If it is agreed that the added consumer cost that comes with a tax increase would deter some people from becoming problem gamblers, then it is difficult to argue against the anti-taxation argument that raising duties will actually result in less revenues.

One committee member suggests that with the amount of variables at play, the debate over revenue figures can only really be speculation.

Before Hurst and Hodgson were committed to scrutiny by the committee, the three pro-taxation lobbyists were invited to pre-empt the 'Netherlands argument.'

The fact that the Dutch tax rise resulted in fairly catastrophic reductions in tax revenues, confounding the predictions of its proponents, seems to be a cast-iron rebuttal to SMF and IPPR's proposals.

Bertram's response leans into the commentary that would suggest the amount of variables makes true revenue figures unknowable - he points to SMF research that shows in fact there is no clear correlation in any direction between tax rates and channelisation.

He alludes to the permissive culture in the Netherlands and a complex judicial system that is ill-equipped to tackle illegal black-market operations.

The UK, he suggests, is well known as a leader in this department.

The theory would seem to be, that if the thin blue line holding the black market at bay in the UK can stand firm, then tax rises would indeed raise funds for the Government.

Stewart Kenny agrees that the Netherlands is not a suitable analogue for the UK and points to his native Ireland where he claims that a doubling of taxation resulted in a doubling of the tax take.

This is where one of the fiercest points of disagreement came.

When Stephen Hodgson took the chair, he said: "I couldn't believe what I was hearing. I'm very familiar with those changes to tax rates in Ireland. They have had a dramatic impact on the retail landscape. Since that tax increase in 2019, over 120 betting shops have closed. Over 15% of betting shops."

The story coming from the BGC about Ireland (noted as being well beyond the remit of this committee) was a familiar one of retail closures, job losses and a degradation of a proud and well-intentioned industry.

Hurst took her opportunity to refute the characterisation of the industry as one that creates social harm.

She told the gathered politicians that betting "Brings lots of pleasure, and a majority of people do so safely and responsibly as part of their leisure."

What was most telling was when Hurst and Hodgson first took their seats, they claimed that a fact referenced cited by the previous speakers - there is a 22% average effective tax levied on industry - was wrong.

After some discussion, it was not clear what Hodgson believes the right answer is. But it became all the more apparent throughout the discussion that the arguments involved here are fundamental, political and devilishly hard to quantify into agreed-upon figures.