Gibraltar accelerates diversification drive after UK tax hike threatens key industry, Feetham says

The steep rise in UK online gambling taxes is “bad news” for Gibraltar and will accelerate efforts to tap new gaming opportunities in other markets, alongside work to diversify the economy into other digital sectors, Nigel Feetham, the Minister for Justice, Trade and Industry, told Parliament on Monday.

In a statement to the House, Mr Feetham said the UK’s decision to sharply increase taxes on remote betting and gaming could unwind recent gains in Gibraltar’s public finances and force a difficult adjustment for one of the Rock’s core industries.

He said Gibraltar’s online betting and gaming sector now accounts for around 30% of GDP, employs more than 3,400 people and generates roughly one-third of tax receipts once corporate tax, PAYE, social insurance and local gambling duties are combined.

Mr Feetham linked the development directly to Gibraltar’s National Tax Strategy, the corporate tax reform drive that underpinned record revenues announced in the July 2025 Budget.

“That work had delivered significant progress and had already been reflected in the record tax revenues announced at our last Budget in July this year, an important pillar of this Government’s tax policy,” he said.

“The tax revenue generated helps to fund our public services, health care and education, and to strengthen our public finances without increasing the burden on ordinary working people.”

“This announcement, unfortunately, could put us back to where we were before then.”

Under the UK Budget measures unveiled on November 26, remote gaming duty on online casino games, poker and bingo will rise from 21% to 40% from April 2026, which Mr Feetham noted would make it one of the highest rates in the world.

The tax on online betting will also increase, from 15% to 25% from April 2027.

Mr Feetham stressed that these were “top line” turnover taxes on revenue rather than profit, meaning the overall effective tax burden on UK-facing operators, once all taxes are factored in, is expected to rise from an estimated 60-65% to as high as 80-100%.

He reminded Parliament that UK gambling taxes are charged on a point of consumption basis, meaning legitimate UK-facing firms based in Gibraltar already pay substantial sums to the UK Exchequer.

“In Gibraltar, firms already pay £750 million of gambling taxes annually to the UK Exchequer,” he said.

Mr Feetham said the impact on Gibraltar’s own public revenues would depend on how far local operators could absorb or mitigate the sharply higher UK tax charges.

Rising costs in the UK would reduce the profits on which corporate tax is paid in Gibraltar and, if companies respond by cutting jobs, would also hit PAYE and social insurance receipts.

Mr Feetham said Gibraltar had spent recent months lobbying the UK Government and Treasury on the potential impact of higher gambling taxes on the Rock and the wider British family, including the risk of driving gamblers into the black market.

“We presented every argument, highlighting the economic impact on the UK and not just Gibraltar, including effects on the black market and the Laffer Curve,” he said.

“In discussions with the UK Treasury, we sought differentiated treatment for Gibraltar and the wider British family.”

He said the Government had then argued for any tax rises to be phased in and kept to a level that remained “manageable”, with Gibraltar bearing part of the adjustment.

“While challenging and still resulting in an annual corporate tax shortfall for Gibraltar, the proposed level was at least one we could attempt to mitigate elsewhere, though this, too, was ultimately not accepted,” he said.

Against that background, Mr Feetham said Gibraltar now had to push ahead with a wider economic shift while working to reshape its successful but exposed gaming sector.

Others had spoken of the need for a “Plan B”, he noted, but replacing an industry of this scale could not be done quickly.

“Yet adjust we must, and that means doing things differently and seizing new opportunities for Gibraltar as they arise,” he said.

“But there is no way of sugar-coating this. It is bad news. We did not ask for these measures. We lobbied strongly against them. And, frankly, there was very little more that we could have done.”

Mr Feetham pointed to work already under way with the Gibraltar Regulatory Authority and the Financial Services Commission to drive a “growth agenda” in financial services and technology, including AI, blockchain and digital services, as part of an effort to broaden the Rock’s economic base.

“These measures include accelerating our work on technology-friendly regulatory frameworks, expanding support for AI, blockchain and digital services, and creating the conditions necessary to draw high-value businesses across emerging sectors,” he said.

“By focusing on innovation, skills and smart regulation, we can broaden our economic base, generate new revenue streams and secure long-term prosperity for Gibraltar at a time when other areas of our economy will be impacted by the recent UK Budget changes.”

Mr Feetham reminded MPs that Parliament had already unanimously approved legislation enabling the Gibraltar Government to issue directions to the Financial Services Commission in Gibraltar’s macroeconomic interests, underscoring a willingness “to act decisively, when necessary, to protect jobs, maintain competitiveness, and promote sustainable growth”.

He also confirmed that the Government aims to bring the long-awaited new Gambling Bill to Parliament with cross-party backing and said he had instructed the Gambling Commissioner last week to step up work on growing non-UK business.

“On Friday, I instructed the Gambling Commissioner to accelerate this work so that Gibraltar can move swiftly to capture opportunities beyond the UK and strengthen the long-term resilience of our gaming sector,” he said.

Mr Feetham, who recalled his three decades of involvement in building Gibraltar’s growth sectors, said new economic activity would take time to replace the tax revenues at risk and called for a collective effort across the public sector and regulators.

“We therefore need everyone, across the public sector, regulators, and bodies, working together to deliver maximum value, and we must focus as much on spending efficiencies as on growth,” he said.

He closed with a warning against undermining confidence in the Rock at a sensitive moment for its economy.

“Finally, Madam Speaker, this is not the time to talk Gibraltar down. We do so at our own economic peril,” he said.

“It has taken decades to build the strength of our economy, but it could be damaged in a fraction of that time.”

From the Opposition bench, GSD MP Roy Clinton said that when it came to financial services and the gaming sector, “there is no political divide in this House”.

“On that question, I think we can speak as one, in the sense that we know what is best for Gibraltar and these are important industries for Gibraltar,” Mr Clinton said.

“It doesn't matter who is in government, I think we would be saying the same things.”