After a report that Treasury was considering a £3billion tax raid on this sector, the biggest bookmakers in Britain saw their market values plummet by billions.
Entain (formerly 888.com), Flutter, Evoke, Playtech, and Rank Group all saw their share prices plummet as the trading began on Monday. This initially erased more than £3.5billion from their market value.
The sale was prompted after a report in The Guardian published over the weekend suggested that Rachel Reeves faced pressure from two influential thought tanks to increase taxes on the industry in order to plug a £22-billion “black hole” within the public finances.
The Social Market Foundation proposed raising online casino gaming tax from 21 to 42 percent, which would bring in an additional £900 million for the exchequer. Derek Webb is one of Labour’s most generous individual donors. He is a former gaming entrepreneur who has become a regulation campaigner.
IPPR, meanwhile, wants to double the tax on the profits of high-street bookmakers from 15% to 30% and to increase the revenue from online gaming to 50%, raising £3.4 billion in 2030. The duty on products that are “lower harm”, such as bingo and lottery, will remain the same.
Entain shares, which own Ladbrokes and Coral lost 15 percent in the early trading, before closing 61 1/2p or 8 percent lower, at 705 1/2p. Evoke (which owns William Hill) dropped by 14.4%, or 9 1/4p to close at 55.5 3/4p. Flutter Entertainment shares, which own brands such as Betfair and Paddy Power fell by 6 per cent or £11.10 to £174.30. The Mecca Bingo owners Rank Group retreated 3.2 percent, or 2 3/4p to 84p. Playtech, whose technology powers a number of online casinos, sports betting sites, and other gaming platforms, dropped 0.7 percent, or 5p to 735p.
Analysts expressed scepticism about the size of the tax increases, which could lead to many businesses in this industry going into loss. The five companies ended the day with a combined loss of £2.4 billion.
James Wheatcroft, an investment banker at Jefferies told clients that the proposals being considered “would all but wipe out the profitability of bookmakers in the UK,” according to our estimates. Although headlines suggest that investing in gaming firms is a risky proposition, the proposals seem unrealistic.
Investec said the tax plans were “unrealistic” as they would be “industry-destructive” and more or less wipe out profit margins across the gaming industry. JP Morgan said the proposals were “excessive, detrimental to the UK’s regulated gaming market and would drive players into the black market”.
The Betting and Gaming Council is a lobby group for the gambling industry. It said that disproportionate tax systems could lead to an increase in illegal black-market gambling.
Citi analysts stated that it is unlikely the government will implement a massive increase in taxes due to the disruptions it would cause. “But we see UK gambling as tax creep incrementally more probable.”
The UK imposes seven types of gaming and betting duty. Rates vary depending on the activity. The taxes raised £3.3bn last year. Labour warned that the tax increase will be included in the October 30 budget as the chancellor scrambles for ways to balance public finances.
A Treasury spokesperson said: “We don’t comment on speculation about tax changes other than fiscal events.”
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