The UK Chancellor of the Exchequer, Rishi Sunak, came in for criticism on the day after his Budget on the 3 March 2021. The press billed it as the biggest tax grab for many years. But gambling escaped!
Indeed, there was a nice piece in the documents that followed the speech saying that the UK’s beleaguered casino industry would have some relief with inflation being applied to the tax band thresholds.
The UK is in post-Brexit mode. All that could go wrong has, and the benefits of free trade agreements with countries outside the EU have not yet had time to have an impact. Then we have COVID-19.
The UK’s furlough scheme, one of the most generous in the world, must be paid for. Economists on the right were hoping for a business-friendly rate of corporation tax. They were disappointed with a move to 25% to be applied from 2023.
A far cry from pre-COVID talk that the UK would lower the rate to 15% following Brexit. On hearing this, some e-gaming companies wanting to gain some slack from the authorities announced they would be moving their company headquarters from offshore back to the UK or Ireland. Oops! How is that working out?
Other countries’ Treasury politicians have decided to let the economy recover before implementing increases in taxation. Politicians everywhere are working to different timescales that are dictated by the election process. Rishi Sunak knows he has four years before facing the electorate, better to tax now give away later, if you want to win the next election.
The important thing for the UK gambling industry is that gross profits tax on betting remains at 15%.
Another important development is that John Whittingdale MP has returned to the Department for Digital, Culture, Media and sport as Minister of State with responsibilities to oversee the Gambling Act review.
Whittingdale is not from the fringe element of MPs that want to abolish gambling. He is sensible and pragmatic, and having chaired the House of Commons Scrutiny Committee into the 2005 Gambling Act fully understands the industry. He has the honour of being sacked by the worst Prime Minister in living history Theresa May. One lives in hope.
All governments are piling up debt, and people are naturally concerned that it is they that will be asked to pay it down. Gambling companies are concerned that their customers will not have enough disposable income to bet with.
The budget was not designed to pay down the debt. The tax increases announced were put in place for the government to pay its way week in week out.
If we look back at history when governments went through similar experiences, governments financed WW1 and WW2, epidemics, and the Great Frost of 1709 through the bond market. Bonds were issued to be repaid over 5, 10, 20, and 30 years at varying rates of interest. When either the war was won, or the epidemic subsided, the bonds would be consolidated into a perpetual bond with no date on redemption.
The interest rate would be slightly above the average rate applied to the exiting bonds ensuring no dissatisfaction. The consolidated bonds were called CONSOLS.
Winston Churchill used this mechanism when he was Chancellor in 1927 to consolidate WW1 debt.
So, relax, you will not have to repay the debt and your customers, who have built up a nest egg during lockdowns, will be on a spending spree soon thanks to Oxford/AstraZeneca.
Written by Warwick Bartlett