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Because of the UK Gambling Commission’s decision to touch on the subject of how gambling taxes are collected and structured, the industry has been put in a frenzy. The suggested changes to gaming duties ask a big question: will higher taxes push some casinos to pursue licences outside of the United Kingdom? Realistically, this affects both casinos and players, as well as payment providers and the whole community that’s been built around regulated online gambling.
Understanding UK Gaming Duty Right Now
Right now, the UK applies different duties to different types of gambling. Remote Gaming Duty is applied to online casino games, Pool Betting Duty covers pool-based wagers, and General Betting Duty takes care of pretty much everything else. All three of these duties are different, with their own rate and method to calculate it.
When it comes to Remote Gaming Duty, it is charged at 21% of an online casino’s gross earnings. This happened back in 2019, when the UK government decided to raise the duty from the original 15%. Since online gambling efforts have skyrocketed in recent years, receipts from Remote Gaming Duty have grown with it and have swiftly become a huge revenue stream for the Treasury.
However, this also means a sharp rise in the cost of holding a UK licence, greatly impacting how operators conduct business. As a result, there is plenty of reason to believe that changes are on the horizon, particularly with the government closing in on budget gaps that don’t raise headline income taxes. Since gambling is still looked down on in many parts of the country, it is viewed as an easy target politically.
Why Margins Matter
Considering the increasingly tightening regulations within the online casino business, operators aren’t making as high profits as previously. It’s become difficult to meet rising customer acquisition costs in the UK, especially considering how scrutinised and censored many advertisements on gambling platforms are. When factoring in processing fees, software licencing, compliance staffing, and more, the margins erode even more.
While large operators might not feel the ramifications on their businesses in the moment, small and mid-sized operators are faced with the reality of continuing to make a profit or continuously sustaining losses. Even then, larger operators have shareholders who will expect to see growth that simply won’t happen with these new duties.
The Appeal of Alternative Casino Licences
There are different jurisdictions that offer gambling licences with lower tax burdens. However, they do not provide legal access to the UK gambling market the same way that a UKGC licence can. Regardless of that, they are still a big point of concern for operators that want to target international players.
Taking the Malta Gaming Authority licence as an example, there are incredibly low tax rates as well as strong recognition around the world. When talking about Curacao, its licence holdings are less robust, but have been modernised in recent years to be a lot more attractive for operators who want to save money.
While the UK gaming duty pressures grow, it becomes clearer what the monetary strategy is likely to be. If an operator intends to earn £100 million in GGY, the they could pay upwards of £21 million in Remote Gaming Duty before any other expenses come into play. An alternative licence has the capability to be much cheaper, freeing up money for different internal departments.
Payments, Technology, and Player Preferences
Cost pressures tend to be at their highest when it comes to payments. Transaction monitoring is very strict in UK-licenced casinos, ensuring that all payments are compliant. This is meant to protect players and improve the user experience, though some operators might not see the rising costs as valuable.
Casinos using alternative licences can experiment with different payment technologies, even implementing newer types and mobile billing. The pay by mobile casino model has become so popular as frictionless payments become more frequent, so it’s no wonder that some operators prefer having more options available.
Payment technologies are viewed as a competitive advantage within gambling, and if an operator sees that there are more options for players using a different casino licence, they will likely go that direction.
Regulation Risks Versus Commercial Reality
Considering all of the above, it would be misleading to say that UK operators are abandoning the operators in their market. The UK is still among the largest and most regulated gambling markets across the world, with massive player trust and a really strong brand recognition. For a lot of operators, leaving the UK market as a whole would be incredibly risky commercially.
However, that doesn’t apply to every single operator. There are some operators who choose to keep their UK presence while simultaneously expanding with alternative licences abroad. There are even some that are launching new brands outside the UK regulations and hedging against future tax and regulation changes.
It’s very possible that with UK gaming duties increasing further, the importance of alternative revenue streams will only grow.
What Does This Mean for Players?
For players in the UK, tensions and opinions are mixed. On one hand, the UKGC licence will offer strong protections and dispute resolutions for customers. However, these changes have the potential to force operators to make drastic internal changes.
Players who choose to explore different licence platforms will likely find more flexible payment options and different products, though at the risk of their own protection and safety.
An Industry at a Crossroads
No, the UK gambling industry isn’t going to collapse overnight, but it is definitely at a crossroads. Whenever gaming duty changes, operators tend to change how they think about licencing, investments, and innovations.
These changes have the ability to trigger different actions from operators that will end up having long-term effects for their players. In that way, gaming duty is more than just a tax issue. It can be considered a signal that operators, investors, regulators, and players are all watching to see what the next chapter of the gambling industry will unveil.
- B.E. Delmer, Gambling911.com
