Punters will be footing the gambling tax bill – or simply moving to the black market to avoid it

The debate about gambling taxes has moved a long way from simply the topic of harmonisation. That may be what the Treasury recently consulted on, but lots of other interested parties want to talk about tax rates and, more specifically, to what level they should be raised.

One of the big beasts of British politics in the last 30 years entered the discussion last week when former prime minister Gordon Brown called for a hike in gambling taxes to raise £3 billion to lift children out of poverty.

Brown's proposals go beyond what the government has been consulting on, recommending that remote gaming duty rise to 50 per cent from 21 per cent, with machine games duty also rising to 50 per cent.

General betting duty would rise to 25 per cent from 15 per cent, although horseracing would get £100 million in additional support.

Both Brown and the reports he bases his proposals upon cite international examples where European gambling firms operate with much higher tax rates as a reason why duties can be raised in the UK.

Plans to raise tax revenue from gambling in the Netherlands have not worked out

The Netherlands is one of those examples, but recent news from across the North Sea would suggest the situation is a bit more complicated. The Dutch government is reported to be facing a gambling tax hole of more than €200 million, despite having introduced the first phase of a staggered tax rise on the sector in January.

The tax rate on the sector increased to 34.2 per cent from 30.5 per cent at the start of the year and is set to jump again to 37.8 per cent in January 2026. The government expected the increases to generate additional revenue of €202m per year between 2025 and 2028.

However, according to local reports, figures from the Dutch online gambling trading body suggest gross gaming revenue was down by a quarter in the first half of this year. As a result, tax revenue will amount to just 83 per cent of the amount collected in the first half of 2024. The trade body has said the increased tax burden, along with tougher regulations in areas such as deposit limits and advertising, has led to the licensed sector losing market share to unlicensed operators.

It is only fair to say that maladroit regulation is a significant factor in the Dutch situation, but, as British racing knows only too well from affordability checks, that is a familiar state of affairs in the UK too. And it is not just the Dutch industry which has raised issues with the tax rise. The Netherlands Gambling Authority – the country's independent regulator – has voiced concern after conducting an impact assessment of the increase in gambling tax. 

Chief executive Michel Groothuizen said last week: "A financially driven measure like gambling tax is at odds with the policy objective of offering players more protection."

Comparisons with the Netherlands are not the only problem. Brown cited higher tax rates in US states as a reason why the UK industry is undertaxed.

However, that is not comparing like with like. The UK's gambling market is mature and one of the most liberalised in the world with hundreds of brands, whereas the US market began legalising relatively recently and states are often limited to a small number of operators who are willing to shoulder higher taxes for the opportunity to share in its potential riches.

So when Brown cites Delaware's 57 per cent tax rate, there is no mention that Rush Street Interactive has a monopoly in the state.

Gambling operators in the state of New York face a 51 per cent tax rateCredit: Evan Bernstein (Getty Images)

Gambling taxes are set at 51 per cent in New York but there are only nine licensed sportsbooks, and even there it has been proposed that taxes be reduced and more operators allowed in.

And even though legalisation of gambling continues across the US, it is estimated the volume of illegal online gambling there exceeds more than $400 billion annually, according to a letter sent to the US attorney general Pam Bondi by 50 state attorney generals last week.

Brown also said that a 50 per cent levy on gambling would be less than the 80 per cent on cigarettes and 70 per cent on whisky. But ultimately it is smokers and drinkers who pay that tax, and the same will happen with gambling.

The report from the Institute for Public Policy Research (IPPR) cited by Brown admits that it expects "that firms will seek to protect their bottom lines by worsening odds".

The IPPR appears to believe that punters will continue to gamble despite this worse offer but that seems a dangerous assumption to make. To borrow a phrase, there will come a time when the fun stops and they stop, having lost more money more quickly. Or they go elsewhere, to the black market.

Not only will that mean less money for the exchequer, it will have a heavy financial impact on racing, which will lose out through the levy, media rights and sponsorship. 

Flutter results underline UK and Ireland's diminished importance

It is no great surprise the US market dominates commentary around Flutter Entertainment. The company has its headquarters in the country now and its primary listing is in New York. Flutter's American arm FanDuel is the market leader there and very much the jewel in the company's crown.

When it comes to sports betting, it is increasingly American gamblers who shape the impact on Flutter's bottom line.

The US dominates commentary around Flutter Entertainment

One would have imagined Rory McIlroy's victory in the Masters would have been painful for Flutter, and indeed Flutter said that he had been well backed by customers in the UK and Ireland.

However, the defeats of US hopes Scottie Scheffler and Bryson DeChambeau "saved us millions and was ultimately good for the book", Flutter said last week.

Unsurprisingly, the UK and Ireland did not feature heavily in Flutter's update last week given revenue only increased by one per cent. The focus instead was on the US and the company's recent acquisitions in Italy and Brazil.

Even in the earnings call that followed the update, there was little discussion of the UK and Ireland, and the looming threat of tax increases did not merit a mention.

Sky Bet has now been migrated to Flutter's UK and Ireland platform and the company will boost its offer to those customers, but while Britain and Ireland may have been where Flutter started, it is no longer the company's be-all and end-all – or even a primary focus.

Barber's bullets

John Ferguson steps down from BHA board

John Ferguson has become the first of the member-nominated directors to step down at the BHA following the news the governing body is to transition to a fully independent board.

The news came in a BHA filing to Companies House which stated Ferguson's appointment had terminated on July 28, the day of the board meeting at which it was finally agreed Charles Allen would take up the position as chair.

Ferguson had succeeded Luca Cumani as the director nominated by the Thoroughbred Breeders' Association, Racehorse Owners Association and National Trainers Federation. His three-year term was due to end in October.

Super Group enjoys super six months

Super Group, the parent company of Betway, hailed what it described as a "super" first half of the year as the company revealed its latest set of results last week.

Revenue of $579.4 million for the second quarter was a 30 per cent increase on the same period last year and represented a record quarterly high for the company. Profit before tax hit $38.8m. 

Chief executive Neal Menashe said: "The quarter’s success was fuelled by strong execution across our key markets, a full calendar of global sporting events, increased deposits, high customer retention, and margin expansion."

US giant DraftKings has record quarter

DraftKings, the main rival to Flutter Entertainment's FanDuel in the US, also enjoyed a successful second quarter, with records for revenue, net income and adjusted core earnings. Revenue of $1.5 billion was up 37 per cent on the same period last year, 

Chief executive Jason Robins said: "We are pleased to be maintaining our fiscal year 2025 guidance, with revenue expected to be closer to the high end of our range, highlighting the strength of our platform as we prepare for an exciting new state launch."

Dates for the diary

Tuesday: Ladbrokes and Coral owner Entain unveils its interim results. The company's US joint venture BetMGM has already raised its guidance for the year following a strong second quarter.

Wednesday: William Hill's parent company Evoke publishes its interim results. It issued a trading update last month in which it reported a strong second quarter, but with gaming rather than sports betting providing the growth.

Read these next:

The BHA has got its man - now Lord Allen needs to show why it wanted him in the first place 

King George prize-money boost reflects need to maintain relevance of British racing's best events 

Hammer blow inflicted on Indian racing shows why the sport in Britain needs to hammer home 'racing tax' message 

Sign up to receive On The Nose, our essential daily newsletter, from the Racing Post. Your unmissable morning feed, direct to your email inbox every morning.