Treasury Committee hearing: Is gambling undertaxed? Views differ

^{NB. This report was originally uploaded 5/11/25 and was updated 7/11/25 to include the publication of the committee's report.}

The evidence session was divided into two panels. The first saw critics of the gambling industry call for increases in gambling duties to reflect the harm associated with online betting. The second saw industry representatives warn that further tax increases could fuel black market activity and threaten jobs.

Below you can read a summary of both sessions. You can download the full transcript here.

The report

On Friday 7 November the committee published a short report (HTML / PDF) arguing that the government “must be bold in the face of industry scaremongering and tax online betting games at a rate which reflects the growth of harmful and addictive betting practices” (wording from the committee’s press release).

The report concludes that gambling “can be fun”, citing seaside arcades, bingo, sports betting and online gaming as examples, but notes that it also causes social ills. “Different forms of gambling cause varying levels of harm to individuals, families and society. We are not convinced that current Treasury policy on the taxation of gambling captures the varying extent of those harms. The government should sharpen the differentiation between physically present gambling related to horseracing or arcades, versus the online games that promote harmful, addictive, high frequency betting that bring no engagement with or benefit to life in our communities.”

The committee accordingly recommend that the government:

• Ensure that Remote Gaming Duty and Machine Gaming Duty (Standard and Higher rates) are always set at a higher rate than Gaming Duty
• Examine how to tackle black market gambling
• Review whether additional anti-avoidance measures are needed, including in respect of the use of low-tax jurisdictions by the gambling industry

Commenting, committee chair Dame Meg Hillier suggested that the industry “is hiding its more insidious parts behind the friendly facade of its traditional, cultural forms”. She described the claim made to the committee that gambling does no social harm as “staggering”, adding: "We are urging the government not to cave in to industry scaremongering and to tax online betting games at a rate that reflects the level of harm they inflict.”

Evidence session one

Witnesses:

• Dr Theo Bertram (Director, Social Market Foundation)
• Carsten Jung (Interim Associate Director for Economic Policy and AI, Institute for Public Policy Research (IPPR))
• Stewart Kenny (Co-Founder, Paddy Power)

Gambling as a ‘social harm’

Yuan Yang (Lab) began the first session by asking why IPPR thinks that gambling is ‘undertaxed’ in the UK.

Carsten Jung argued that “the current tax system on gambling can be described as basically a replacement for not levying value added tax”. He continued: “the key argument that we make in our report… is that gambling is a social harm”, adding that IPPR differentiate between types of gambling and believe that some (online gambling principally) are more harmful than others and can impact the financial well-being and social life of individuals.

In order to make up for the social harm, Jung proposed an increase in gambling taxation, focused on the most harmful kind of gambling: “A remote gambling duty is one way of doing this—raising it from 21% to 50%”. He suggested that machine game duty could be increased from 20% to 50% as well as the general betting duty (from 15% to 25%). He reported that these moves could raise about £3.2 billion and “would not be punitive taxation”.

Dr Theo Bertram agreed, stating, “This industry is high growth and high profit, but it is also of high harm to the individual and high cost to society”. He called on the industry to pay higher tax, particularly focused on where the harm is highest (such as slot machines and online casinos).

Higher gambling taxes to address harm

Yang questioned the impact of increased taxation on reducing online gambling social harm. Bertram responded that one thing that could be expected is a change in the direction of what the industry chooses to do – focusing more on areas that are ‘less harmful’.

Stewart Kenny believes that betting on horse racing or on the next general election is less harmful than betting on fixed odds betting terminals or online slots. He stated that: “There are two ways of seeing whether a product is highly addictive: how quick is it between investment and result, and how quickly can you repeat the dose?”

He criticised gambling companies for trying to lure new punters into more dangerous forms of gambling. “When you open an account to bet on the next general election or on Manchester United to win the premier league… Within 24 hours, they send you free spins in the casino, for the online slots. That is taking somebody from the least addictive product to the most addictive product. It is rather like going into a bar for your first drink and having a shandy, and after you finish your shandy the barman says, “Why not have a triple-strength brandy on the house?””

Kenny advocated for targeted taxation, saying: “If there is one message I can give you, it is that the parts of the industry that have the most harm need to be taxed higher. We need to disincentivise the bookmakers from sucking people from the sports book into the online casino, because the online casino is a machine.”

Economic and social impacts

John Glen (Con) asked how, given the Treasury's reluctance for ‘hypothecated taxes’, it can be ensured that the money raised is used for its intended purpose rather than added to general taxation.

Jung replied that there is no way to do this in budgeting—linking the revenue in one place to another issue somewhere else. He continued that: “The point is that hypothecation would basically be a political issue”.

Would increased tax change behaviour? Jung responded that it depends on how much demand for gambling will be reduced as a result of the tax and how much people will be deterred. He added that, on its own, “I would argue that it is not a sufficient policy to address problem gambling. It does a bit—there will be a reduction in use—but probably not to the full extent that we would like.”

Bobby Dean (Lib Dem), highlighting the economic problems, asked whether introducing these taxes would raise more revenue for the Treasury, or by doing so, the government is trying to reduce harm: “If we are too successful in reducing harm, we might end up reducing revenue”.

Bertram acknowledged the point raised and provided an example that when the Netherlands introduced a similar tax, traffic went up to the black market, and the Netherlands did not recoup any money.  He continued: “If there was a correlation between the level of tax and the level of the black market, you would expect to see a nice graph where the lower the tax, the lower the size of the black market and where there is a higher tax, you would expect to see a larger black market. There is no such correlation”.

Kenny added that in 2019, Ireland doubled its betting tax, and the take went from €52 million to €95 million, arguing that “there was no rise in black market activity.”

Can gambling be taxed effectively?

Jung told Dean that gambling is ‘undertaxed’ in the UK due to many companies moving offshore to avoid higher corporation taxes. He argued for increasing domestic levies and taxes as a response.

Bayo Alaba (Lab), a member of the Culture, Media and Sport Committee who was present at this session, asked if increased gambling taxes would harm seaside arcades. Bertram replied, “We do not want to tax those arcades out of business, but we want to tax more highly the things that are highest harm.” He reported that online slots grew by 82% from 2016 to 2024, without a tax regime to address it.

Kenny agreed with Bertram, while Jung said that the industry argues “there will be lots of employment losses and customer pass-through,” but employment is higher in “bricks-and-mortar gambling premises” as against online. He suggested that taxing remote gambling and “the most harmful machines in bricks-and-mortar shops” while limiting effects on other activities would limit the employment effects.

Evidence session two 

Witnesses:

• Grainne Hurst (Chief Executive, Betting and Gaming Council (BGC))
• Stephen Hodgson (Chair, Tax Committee, Betting and Gaming Council)

Rate of tax on gambling

Yuan Yang questioned the reported effective average betting levy of 22% last year, highlighting that the industry is exempt from VAT and corporation tax (at 25%), and asking, “Why is the industry paying so little?”

In response, Stephen Hodgson said, “The industry is actually paying a much higher effective tax rate than that, so I am not quite sure how that number was calculated.” He explained, “The effective tax rate that we see when we look at the whole range of taxes that are paid by businesses in this industry is in excess of 65%—often in excess of 80%.”

Hodgson attributed the higher effective rate to various taxes such as corporation tax, business rates, employers’ national insurance, ‘irrecoverable VAT’ and a range of gambling excise taxes, including the general betting duty, machine games duty, remote gaming duty and several others.

He added, “Most businesses benefit from various different reliefs that mean that their effective corporation tax rate is a bit less than the headline rate. I think the most important thing is that effective tax rate, because the vast majority of tax paid by businesses in this industry is through the gambling excise duties. The other taxes, while adding to the burden, are a much smaller piece of the story.”

Yang highlighted the committee’s first session with other panellists about the gambling industry-associated social harms. Grainne Hurst rejected the concerns, saying, “I completely disagree that any gambling product forms part of social harm. Look at the fact that 22.5 million people like to have a flutter every month on products with BGC operators… If you look at the statistics, the majority of people gamble safely and responsibly as part of their leisure.”

Impact of the increase and concerns about the black market

Catherine West (Lab) reported that the average betting levy is 22% in the UK and 53% in the US, asking if the UK raised its levy closer to the US rate, how might the industry cope.

Hurst stated, “There is absolutely no doubt that customers would change their behaviour if there were any further increase in tax on the industry.” She believed that the black market is already a really’ serious threat’. She warned, “If there are additional tax increases… we would see costs increase for the customer, the odds would get worse, the offers would get worse and the return to players would be reduced.”

Hodgson suggested that any increase in taxes would have a counterproductive effect, saying it would have two consequences: “first, the Exchequer raises less revenue, and secondly, consumers are gambling in the black market, where they do not benefit from any protections”.

John Glen asked about the “effect of tax”, arguing that “the rational economic behaviour of a betting person would be to go somewhere where they get better odds.” He asked for evidence from other jurisdictions.

Hodgson replied, “You can increase tax rates and end up with less tax and fewer consumers in the regulated market”. He referenced the committee’s first session and the panellists' discussion on what has happened in the Netherlands and said there is no doubt that there has been an effect there. “Authorities themselves say that has had a negative impact on the amount of customers in the regulated market, with knock-on consequences for tax revenue, which is significantly below what the Netherlands forecast this year”, he stated.

Bayo Alaba raised a concern, saying: “My concern is the disproportionality of the effects of taxation. Seaside arcades are in a unique… position in which they cannot necessarily put up prices. Do you agree that changes in gambling taxation should take that into account?”

Hurst highlighted that they do not represent seaside arcades at the Betting and Gaming Council, however, she acknowledged Alaba’s point, “if we see any further tax increases… it is likely to have an effect on the retail side of businesses, which obviously employs lots of people… That is what the BGC is trying to avoid.”

The Chair of the committee, Dame Meg Hillier, asked: “if you tax the online part of a business, will it have an impact elsewhere?”

Hurst provided a real-life example: “In its latest financial results, the Rank Group… made £44 million in profit after tax, they actually paid £188 million in taxes and duties. That is one P&L… and that is obviously going to hinder its ability to invest in different parts of the sector… we cannot have specific carve-outs because any further tax increases will have an impact on any part of the business”. She indicated that EY has predicted that there could be 40,000 potential job losses and the black market would grow by another £8 billion of staking, and there would be a ‘huge hit’ to the GVA of the industry.

Hodgson echoed the point. “These businesses are operating in an integrated manner. If you were to increase remote taxes and leave land-based taxes untouched, you would still see a consequence on the overall ecosystem… They will look at costs across the board; they do not look at bits of the business in isolation. That just would not make sense.”

Dame Siobhain McDonagh (Lab) warned that “we are involved in a giant game of whack-a-mole in the run-up to the Budget… where everybody whacks the tax increase that they could get in order to whack it on to somebody else”. She turned to Hurst and voiced her concern about her argument that if you tax the most lucrative part of the industry this will affect other aspects of gambling which committee members were not against.

Hurst said her arguments drew on “the IFS, the Resolution Foundation and others”. She argued that customers change their behaviour, and this is a pattern that has also been seen in other markets.

Irish betting tax consequences and other international examples

McDonagh asked the panel about Ireland's decision to double its betting tax. During the initial session, Stewart Kenny had suggested that this change led to a doubling of revenue for the Treasury, without any ‘downturn’ in participation.

Hodgson said that he is very familiar with these changes, and they have had a “dramatic impact” on the retail landscape in Ireland. He suggested that since the increase 120 betting shops have closed in Ireland. He highlighted another point, saying that “the Irish system… has taxed the stake rather than the gross profit of the business. That is something that the UK used to do about 25 years ago… it creates a more expensive regime. It is not a great approach, and not one that I would recommend. In most countries that apply the tax at the stake level… it does not work particularly well.”

Bobby Dean turned to Hurst and said: “You have already alluded to the wide range of tools that you can use to tackle the black market… Your argument that the tax increase will drive people over there does not seem to stack up, particularly given the evidence… comparing some other countries’ black market share and tax regimes with our own. We had the example of Estonia, which has a big black market… but quite a low tax regime… the Czech Republic has a very small black market… but quite a high tax regime… Do you accept that the link you are trying to make is quite weak?”

Hurst disagreed and pointed to other jurisdictions, such as Germany, where 50% of its market is the black market. She argued that the key point is that “we should not be sending” customers to the black market, adding that in the UK, the black market has grown to 4%. She stated: “If you look at the tax receipts and revenues from the regulated sector, in 2018-19 we were generating £5.5 billion in tax and £7.7 billion in GVA. That has gone down… to £4 billion in tax and £6.8 billion in GVA”.

Dean asked why betting and gaming businesses are based in Gibraltar, highlighting their exemption from VAT and lower corporation tax rates.

Hodgson responded by clarifying what he said were misconceptions about VAT in the industry, stating: “The reality is that VAT is not applied to betting and gaming, because excise duties are applied instead. That is the situation in almost all of the world.” He explained the impracticalities of applying VAT to betting and gaming transactions.

Regarding corporation tax, Hodgson said, “We have lots of businesses headquartered in the UK, paying UK corporation tax, but with operations in a number of other jurisdictions, like Gibraltar, and paying local corporation tax in those places.”

Tax structure

The committee chair highlighted that in other industries, ringfencing has been done in different types of activity. She asked if the Betting and Gaming Council has considered doing the same. Ringfencing would be difficult for operators to do, said Hurst.

Glen put it to Hurst that “[w]hat we are trying to get at… is that people, and the government, are frustrated that something that has a significant social ill for those individuals is not properly addressed in our tax system.”

Hurst again disagreed that there are “social ills” as a result of gambling. She believed “it is properly taxed in the system… there are different taxations for different products”. She explained that sports betting is currently taxed at 15% and remote gaming duty is taxed at 21%. She added that the industry is already absorbing £1 billion-worth of costs from the Gambling Act review White Paper, and “any further tax rises now will put jobs, shops and sports sponsorship at risk”.