UK raises tax on gambling machines
20 March 2014
Posted by: Author: Fin24
Britain increased taxes on high-stakes gambling machines on Wednesday, sending shares tumbling in British bookmakers which rely on them for a growing share of their betting shop income.
The duty will rise to 25% from 20%, Finance Minister George Osborne said. Gamblers can spend up to £300 ($500) per minute on the machines and critics say they are highly addictive, although bookmakers say there is no evidence to support that claim.
Shares in Ladbrokes, Britain's second largest bookmaker, fell by almost 13% to 138.7p while market leader William Hill was down nearly 6% to 355p.
Ladbrokes is more reliant on income from its high street shops than William Hill because it has struggled to build up its online business.
"The news is a surprise and a clear negative for both stocks," said analyst James Hollins of Investec.
"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," he added.
He forecast the cost to William Hill would be £23.8m in 2015, while estimating the impact on Ladbrokes at £21.9m and a hit of 4.1 million euros for Irish-based Paddy Power.
Ladbrokes cried foul over the new higher tax.
"Today's announcements mean yet more taxes on an already heavily taxed industry - another £80m to add to the 1 billion already paid," said spokesperson Ciaran O'Brien.
"The pips are squeaking and we must surely now be given some stability to continue to support our employment and tax base while delivering for shareholders."
There was better news for Rank Group, which announced plans to open three new bingo clubs after the government halved duty on the game to 10%.
"By bringing bingo duty into line with other forms of gaming entertainment, the government has created a basis for renewed investment and innovation," said Ian Burke, chief executive of Rank, which has 97 bingo halls in Britain.
Shares in the company, controlled by Malaysia's Guoco Group, rose 5.3% to 151.9p.
This article first appeared on fin24.com.