Report warns higher taxes and regulation may increase illegal gambling
The PwC report finds European countries with higher gambling tax have more black market activity.
UK.- The Betting and Gaming Council has fired what’s likely to be its final salvo in efforts to sway opinion against a substantial hike in British gambling taxes in chancellor Rachel Reeves’ Autumn Budget in two weeks’ time. It’s published a report that suggests that European countries with higher gambling tax and regulation are more likely to see increased black market activity.
According to a report produced by PwC, entitled Impact of the taxation and regulatory environment on European online betting and gaming markets, there are clear links between restrictive policy regimes across Europe and black-market growth.
The study provides examples of market channelisation in various European countries and suggests that in countries with higher tax rates, large proportions of their gambling markets move offshore.
It provides the examples France (57 per cent black market), Sweden (35 per cent) and the Netherlands (37 per cent). By contrast, Spain and Denmark, where tax rates are more moderate and licensing systems open, maintain higher levels of onshore participation, with only around 11 per cent of gambling taking place outside the regulated sector, the report says.
Smaller regulated gambling markets
The report finds that around 5 per cent of all online betting and gaming in the UK now takes place on unlicensed black-market websites. The BGC notes that this is a sharp rise from a previous estimate in 2021, when the black market was thought to account for only 3.3 per cent of total spend. It says this is equivalent to hundreds of millions of pounds in untaxed, unregulated activity.
The report concludes that higher effective tax rates and tighter rules consistently lead to smaller regulated markets, while jurisdictions that liberalise and maintain balanced taxation enjoy stronger growth.
The findings also challenge the assumption that higher gambling duties increase public revenues. Between 2019 and 2024, countries with tax rates below 25 per cent of gross gaming revenue saw annual growth in tax receipts of 13 per cent, compared to 9 per cent in higher-tax jurisdictions.
Operators facing steeper duties typically cut back on marketing and promotions, the analysis found, making licensed platforms less competitive, the report adds. It shows how operators respond to higher regulatory and tax environments by adjusting gross win pricing, reducing bonuses and reducing spending. This makes the player proposition less attractive.
The findings come as the Treasury prepares its Autumn Budget and reportedly considers potential changes to remote betting and gaming duties. Many Labour and Liberal Democrat MPs are in favour of a proposal to increase Remote Betting and Gaming Duty from 21 to 50 per cent. On November 26, Rachel Reeves will reveal whether she had decided to adopt the proposal for such a sharp hike or a softer increase, but she has hinted that she’s the case for at least some form of tax rise for online gaming.
Grainne Hurst, CEO of the Betting and Gaming Council, said: “Britain has one of the safest gambling markets in Europe but if the Treasury isn’t careful, we could quickly end up like France or Sweden, with huge black markets contributing nothing in tax, offering zero player protection, and providing no funding for sport or the economy.
“Well-balanced regulation and fair taxes protect players, raise more revenue for the Treasury, and support thousands of jobs. Unlicensed operators do none of those things.”
