UK gaming tax rise could cause ‘devastating’ impact on Rock, Feetham warns 

Any increase in UK betting and gaming taxes would hit Gibraltar “disproportionately” and have a “devastating” impact on the Rock’s economy, putting at risk thousands of jobs and up to £160m in government tax receipts. 

That was the stark message delivered by Nigel Feetham, the Minister for Justice, Trade and Industry, during meetings with UK MPs and officials in London earlier this week. 

Mr Feetham flew to the UK capital after the House of Commons’ Treasury Select Committee recommended in a report last week that the UK Government raise duties on remote gaming and machine games. 

The report said the UK Government should not “cave in to industry scaremongering” and tax online betting games at a rate that reflects their harm, urging it to increase taxes in a Budget statement due later this month. 

For Gibraltar, the impact of such a move could be seismic. 

“Any such increase in UK betting and gaming taxes will disproportionately affect Gibraltar,” Mr Feetham told the Chronicle. 

“If adopted, the Treasury Select Committee’s proposals would have a devastating impact on the economy of Gibraltar, potentially leading to the destruction of perhaps a quarter of all economic output, the loss of thousands of jobs, and the loss of over £160m of local tax receipts, which pay for vital social programmes, including housing, healthcare and elderly care.” 

“This impact would be felt just months after the UK and EU reached a political agreement intended to secure the future economic and social prosperity of the Rock.” 

“The consequences for Gibraltar are real and serious,” Mr Feetham added. 

“I have therefore urged HM Treasury to proceed with an abundance of caution as it prepares for the autumn Budget on the 26 November, mindful of the very real risks posed to the economic prosperity and financial stability of Gibraltar, as well as to jobs and tax revenues in both of our respective jurisdictions.” 

“The message has also been delivered at different levels of the Government and not just Treasury.” 

Remote Gaming Duty and Machine Games Duty in the UK are currently set at 21% and 20% respectively, but the Treasury Select Committee recommended they be set higher than Gaming Duty at 50%. 

In practical terms and without a reduction in Gaming Duty, it would mean duties on remote gaming and machine games could be increased to more than 50%. 

Such a move could have a crippling impact on Gibraltar-based betting and gaming businesses with UK facing business, which are licensed and regulated by both the Gibraltar Gambling Division and by the UK Gambling Commission, and contribute to the public purse in both the UK and Gibraltar. 

Gibraltar-based betting and gaming businesses make a vital contribution to the Rock’s economy, accounting for 30% of GDP and employing more than 3,400 people, over 10% of the total workforce. 

They also generate approximately a third of all Gibraltar Government tax receipts through a combination of corporate income tax, personal income tax, social insurance, local gambling duties and other local taxes. 

But they also pay more than £750m annually to the UK in betting and gaming duties, which are levied on a “point of consumption” basis. 

The concern is that any hike in UK gaming duties could tip that balance to a point where businesses are forced to take radical steps to restructure and reduce costs. 

The concerns are not just in Gibraltar. 

In the UK, industry representatives have warned that an increase in taxes could lead to massive job losses and closures in the UK’s regulated sector, driving players to the unregulated market and undermining the aim of ensuring responsible gaming. 

“The last two days in London have been among the most intense since I was elected to office, even compared to my work in the European Parliament to get Gibraltar off the EU ‘grey list’,” Mr Feetham said. 

“There’s a lot at stake for Gibraltar and consequentially for the UK itself, and I’m encouraged by the level of engagement. I think they understand what’s at risk.” 

“I’ve set out Gibraltar’s position clearly and identified the risks without holding back.” 

“In the end, all you can do is draw attention to what’s at stake and I’ve made sure that message has been heard at different levels of Parliament and Government.” 

REGULATOR ECHOES CONCERNS 

The message was echoed in Gibraltar by Andrew Lyman, the Gambling Commissioner who oversees the sector’s licensing and regulation on the Rock. 

In a post on his social media earlier this week, Mr Lyman said it was “disingenuous” to suggest the industry could absorb tax increases without suffering wider structural impact. 

“Regardless of what people think about the industry, normal economic theory applies to the sector and it is not ‘scaremongering’ when it references, on the basis of valid external analysis, the likelihood of job losses and cost reduction to combat loss of profit,” Mr Lyman wrote on LinkedIn, adding gaming companies had already absorbed “a myriad of UK regulatory changes” in recent years.

Mr Lyman said there might be “a little ‘juice’” in a small increase in remote gaming duty of no more than five percentage points, but that anything beyond that risked passing a “tipping point” and lead to “genuine pain” that would cause the sector “irrecoverable damage”. 

“Pain will mean not just reduced growth, but as cogent examples demonstrate, tax yield would reduce in the medium term, [and] perhaps in the shorter term,” he wrote.

And he added: “Once the regulated sector is gone it’s gone.”

“Of course all gambling products have the capacity to cause harm and UK Gov is entitled to consider taxing products that cause universal harm more highly.”  

“However, gambling does not cause universal harm and harm is better reduced through targeted and tough regulation, not a punitive tax policy that may be self-defeating.”

“The risk of a rising UK black market is real and apparent.”

Mr Lyman said UK political support for Gibraltar was best expressed by creating conditions that allowed Gibraltar’s economy to be self-sustaining, adding he remained hopeful “sensible fiscal policy and economic literacy” would prevail.