'Bemusement' and 'dismay' after UK gaming tax hikes
Posted by Bev Freeman on 15 Jun 2009 at 15:06
Casino operators and bingo companies have been left "bemused" following the UK government's decision to up tax on the sector to raise millions of pounds in extra revenue.
Casino Enterprise Management to a close look at the issue after the changes were announced by the chancellor of the exchequer Alistair Darling back in April.
Many operators are already battling the recession and the impact of the smoking ban in Britain, and there are concerns the changes could hurt profits further.
At the end of April the rate of tax charged on bingo went from 15 per cent to 22 per cent, which could hit the already-struggling bingo hall sector which has seen a number of closures and a fall in customer numbers in recent years.
Before the changes, bingo halls would charge initial operating fees as part of the game charges for players, which is where the 15 per cent tax, now up to 22 per cent, would be made by the government.
The idea behind the move is to ensure the government picks up tens of millions of pounds in extra tax over the next 12 months.
Operators accused the government of giving with one hand and taking away with the other, after officials said the changes could help bingo as they also involved the scrapping of what was known as 'double taxation', where companies would be charged VAT of 17.5 per cent before they paid the 15 per cent duty.
Although the exchequer will lose money in revenues, Casino Enterprise Management said some operators think the government has given them something that wasn't on the table for officials to hand over in the first place. This is because a VAT duties tribunal ruling in May went in favour of Rank Group, one of the biggest operators of bingo in Britain.
The company had complained to her majesty's Revenue and Customs back in 2006 to get millions of pounds back it had paid in VAT.
The firm won the case after it was said the taxation went against European Union laws.
As a result, according to the magazine, rank stopped paying VAT on about two thirds its bingo games.
Experts later said that the government had ditched double taxation because it realised it had lost the case and to avoid other companies starting to issue their own claims.
Officials at rank accused the government of "vindictiveness" over its moves.
But bingo has not been the only game impacted in Britain. Poker has also been in the government's sites, and games must now be subject to a casino tax which may mean that some venues end up paying far more than they did before the April changes.
Before the latest budget, the government charged VAT at 15 per cent for all revenues a casino picks up from charging card room fees. This was altered so poker is in the same category as games like roulette.
This level of tax is charged on a sliding scale using revenues earned from each venue over six months. Higher revenues incur 40 to 50 per cent tax rates.
This has angered larger and more popular casinos who can make significant revenue from running poker games. In effect one of their main sources of income has gone from a 15 per cent tax rate to 50 per cent.
Casino Enterprise Management also said that because casinos aren't being charged VAT this means that they can't now claim back this cash from the government. This is because if a British Company is being charged VAT for buying in a service, subject to certain conditions, it can get back the cash to start the consumer picking up the tab.
Peter Brooks, executive deputy chairman for the UK’s largest casino operator, Genting UK PLC, was quoted by Casino Enterprise Management as saying: "The changes in tax structure are worrying for safe, socially responsible casino operators,”
“On the one hand, the government has encouraged investment in research and regeneration. On the other hand, the tax system is damaging.”
Concerns have also been raised that casinos could now simply ditch poker to reduce the amount of tax they pay. This could then lead to players ending up in unlicensed venues.
A statement by Rank Group expressed "dismay" over the changes announced in April, particularly in relation to bingo and poker. It also criticised the government for making the changes without consulting the industry and said officials had not discussed or mentioned the tax increases for bingo and poker in meetings before the budget.
Fruit machines have also been hit with a nine per cent increase in tax thanks to a further desire to generate extra cash from forms of gaming.
In the UK duty on fruit machines depends on the stakes and jackpots used, and the yearly costs for all levels have risen significantly. Some firms have said this could have a knock-on effect through the machine industry which could affect those who build the machines, not only those who own them and place them in venues.
The latest round of tax increases for Britain's gaming sector have come at a difficult time when many firms were already feeling the pinch. How they will cope won't be known for some months - but many must now be praying for a UK economic upturn before the tax man's grip fully tightens.
