UK Gambling Shares Tumble on Fears of Government Tax Grab
Stocks of UK-based gambling firms experienced a significant decline in early trading on Monday as investors responded to news that the British government intended to carry out a "tax raid" on the sector.
Investors seem to have been unsettled by a report released by The Guardian on Friday, indicating that the new Labour Party government is considering increasing taxes on the sector to address a £22 billion (US$28.7 billion) gap in the country's finances.
Although Treasury officials have not made a decision on the matter, they “seemed open” to the proposal of obtaining an additional £900 million (US$1.2 billion) to £3 billion (US$3.9 billion) from the sector, as reported by The Guardian.
Last year, the sector contributed £3.4 billion (US$4.4 billion) to UK tax revenue, accounting for approximately 0.3% of overall governmental income.
Sources informed the newspaper that the anticipated tax increase could potentially be implemented in Labour’s initial budget, expected this month.
Trigger Most Affected
Evoke [LON: EVOK], the owner of William Hill in the UK and 888, suffered the greatest loss from the speculations. Its stock plummeted 15% in early trading on the LSE.
Entain [LON: ENT], which co-owns BetMGM in the US with MGM Resorts, closely followed, falling by 14%. The firm possesses UK heritage betting brands Ladbrokes and Coral, as well as bwin, PartyPoker, and several regional European brands.
Shares in Flutter Entertainment [LON: FLTR], the owner of FanDuel and brands like Betfair and Paddy Power, fell by 7%, a decline mirrored by Rank Group [LON: RNK], Britain's largest land-based casino operator.
Overall, the four firms collectively decreased £3.25 billion ($4.2 billion) in market value in a single morning. All four had shown slight gains at the time of publication, mid-morning UK time.
The earlier Conservative Party government strengthened gambling rules through a series of measures that are being phased into the industry gradually. These encompass affordability assessments for participants and wager limits for online slot games.
The industry anticipated that although Labour would carry on with these reforms, there would be no additional government-imposed restrictions on the gambling sector.
Increasing Taxes?
The Treasury is now reviewing a report from the left-oriented think tank, Institute for Public Policy Research (IPPR), as reported by The Guardian. The study projects that the government might generate £2.9 billion (US$3.8 billion) in the upcoming year by increasing taxes on "higher harm" items, including slots and casino games.
The Betting and Gaming Council cautioned that regions which have implemented “disproportionate” taxes have experienced a rise in illicit online gambling.
An industry insider informed The Guardian: “The anti-gambling movement has contributed at least £1 million (US$1.3 million) to Labour in the last 18 months, raising questions about what they anticipate in exchange for that.”
