Increased Tax on FOBTs Hits UK Bookmakers Where It Hurts

Posted on: March 22, 2014, 05:30h. 

Last updated on: March 21, 2014, 10:59h.

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Expertise: Commercial Gaming.
Fixed-odds betting terminals FOBTs UK tax hikes
Controversial fixed-odds betting terminals (FOBTs) have become subject to increased taxes in the UK. (Image: The Guardian)

Fixed-odds betting terminals (FOBTs) have been a highly controversial issue for the UK’s bookmakers, who have put tens of thousands of the machines in their betting shops. Most of that controversy has been over whether FOBTs contribute to the creation of problem gamblers and aid and abet players’ propensities to lose too much money too quickly.

But now the shoe is on the other foot, as the bookmakers have something new to complain about themselves when it comes to these profitable games. A new proposal announced by finance minister Chancellor George Osborne would raise the duty on FOBTs from 20 to 25 percent, a move that would affect virtually every bookmaker in the country.

Tax Could Impact Bottom Line for Bookmakers

The move, ironically, has been criticized by both bookmakers and detractors of the machines alike.

“Today’s announcements mean yet more taxes on an already heavily taxed industry – another 80 million pounds ($133 million) to add to the 1 billion ($1.66 billion) already paid,” said Ladbrokes spokesperson Ciaran O’Brien.

“We must surely now be given some stability to continue to support our employment and tax base while delivering for shareholders,” he added.

Stock shares for the two largest UK bookmakers – William Hill and Ladbrokes – dropped sharply with the news of the tax hike. Analyst James Hollins of Investec said that the increased taxes meant that revenue forecasts for major bookmakers would change based on this tax alone.

“Forecasts will have to change and this is a massive blow, particularly to Ladbrokes, placing significant pressure on group returns, the turnaround of mobile and the dividend that the group had stated was secure for 2014,” Hollins said.

Critics of FOBTs Also Concerned

One might think that critics of the FOBTs would be happy to see the machines highly taxed. But some are saying that the latest move shows that the government cares more about getting their chunk of the money these machines make than they are with protecting consumers.

“Rather than deal with the FOBT’s [sic] and proliferation of Betting Shops [on] High Street Osborne says he wants to make more money from them,” tweeted Tottenham MP David Lammy.

The Labour Party – of which Lammy is a member – has pushed for local officials to have more power to control the spread of FOBTs in their communities. However, that proposal was defeated in Parliament earlier this year.

Other “Sin Taxes” Also Changed

The new tax proposals don’t stop at FOBTs, however. In good news for bingo operators, the duty on that game was cut in half to just 10 percent. That was enough for the Rank Group to announce they would open three new bingo clubs in the UK, which would bring them up to 100 bingo halls in total across Britain.

“By bringing bingo duty into line with other forms of gaming entertainment, the government has created a basis for renewed investment and innovation,” said Rank chief executive Ian Burke.

The FOBTs Controversy

Fixed-odds betting terminals, or FOBTs, have become commonplace in UK betting shops in recent years. These machine games allow players to play a variety of electronic games, with roulette being the most common. While the machines are limited to four terminals per shop, they can account for as much as half of some shops’ profits.

Critics have called the games “the crack cocaine of gambling,” claiming that the fast action is dangerous for those predisposed to problem gambling. Efforts to limit the spread of FOBTs by local councils have, so far, been largely unsuccessful.