Bookmakers Lose Most From Gaming Machine Tax

The U.K. increased taxes for high-rollers who play on gambling machines. The law was announced on Wednesday, March 19, and is set to hit bookmakers hardest by funneling an additional 5 percent of their income to the government.

Before the tax increase, gamblers and bookmakers paid 20 percent in taxes on high-stakes slots, video poker and other gambling machines. The new policy now takes 25 percent of these winnings from players and operators.

Critics of the fixed-odds machines say they lead to compulsive gambling and impulse betting. The machines accept as much as 300 pounds per minute in wagers, and at least 33,000 terminals have been set up in shops throughout Britain.

No Evidence High-Stakes Machines Are Addictive

Gambling machine operators have started displaying a warning on their machines to inform players of the risk of huge losses. They argue that no evidence has been found linking their machines with a national increase in compulsive gambling.

Bookmakers’ stock prices fell following the news. Ladbrokes, the second-biggest gambling machine operator in the U.K. lost almost 12 percent per share. The top bookmaker, William Hill, lost 7 percent per share.

The tax increase goes into effect next year and is predicted to cost Ladbrokes around 20 million pounds in 2015. William Hill estimated that the new tax would have caused a loss of 16 million pounds if it had been in effect a year ago.

Online Gambling Tax Loophole

The tax hurts Ladbrokes more than it does William Hill because Ladbrokes receives much less revenue from online gambling, which isn’t affected by the proposed tax increase.

Until recently, bookmakers have been able to take advantage of a loophole in tax laws that prevented them from paying 300 million pounds per year in taxes. They avoided the taxes by operating their online gambling websites overseas, but the government is putting an end to this scheme.

Ladbrokes objected to the policy because they have experienced several problems lately. They said the new law will cost them an additional 80 million pounds this year.