This week, the UK government was called upon to assess the economic impact of gambling duty hikes on Gibraltar. A Labour MP had voiced concerns that these tax increases might have a disproportionately negative effect on the peninsula’s economy.
On Wednesday, during the third reading of the Finance Bill in the Commons, Gareth Snell, the MP for Stoke-on-Trent Central, put forward an amendment. The amendment aimed to include an impact assessment of the UK Remote Gaming Duty increasing to 40% and the Remote Betting Duty to 25%.
The amendment requested that the government publish the assessment by 1 April 2027, specifically addressing sections 83 and 84 of the Act and their implications for Gibraltar’s economy.
Snell informed MPs, “One third of Gibraltar’s tax revenues come from the [gambling] sector. So, any action we take here that impacts that sector there – I fully acknowledge that this is not an intended outcome of the decision – would create a significant gap in its economy, which would need to be filled.”
Gibraltar’s economic pillar
Since the tax hikes were announced in the autumn budget in November, Nigel Feetham, Gibraltar’s Minister for Justice, Trade and Industry, has been very outspoken about how harmful this measure could be for its own sector as well as broader public revenues.
Feetham stated on 1 December, “This is an issue of crucial importance to Gibraltar and one that could directly and indirectly affect our public revenues.” He further pointed out that the UK gambling tax increases are “a tax on revenue, not profit” and that modelling indicates the effective tax rate “will rise to between 80% and 100%”.
According to figures cited in the parliamentary debate, Gibraltar directly employs around 3,500 people. The territory’s gambling sector also generates approximately one-third of its tax revenue.
Snell emphasized that Gibraltar levies taxes on operators’ gross turnover. Reducing that turnover or altering how UK customers place bets could significantly shrink Gibraltar’s tax base. The MP warned that this shortfall could amount to tens or even hundreds of millions of pounds.
Black market impact ‘overblown’
Snell also called for a similar impact assessment of the black market and how much the gambling tax increases could affect it in the UK.
However, Alex Ballinger, the MP for Halesowen, downplayed the impact of the black market. He said it was common for “industries associated with harm [to] use the black market as an excuse to avoid regulation or additional taxation”.
“In the gambling sector, the threat of the black market is exaggerated. The regulated market is dominant, and in recent years, there have been numerous tax changes that haven’t increased the size of the black market,” he added. He cited examples from a 2021 Gambling Commission study which “found that only a very small proportion of UK gamblers ever used unlicensed sites”.
Dan Tomlinson, the MP for Chipping Barnet, said the government would ultimately not make further changes to the bill but would “monitor the impact of the change” and continue to engage with ministers in Gibraltar.