Online Casino Costs Rise As Betting Companies Face Higher Taxes

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As of October 2019, the rate of Remote Gaming Duty (RGD) in the UK is increasing by 6%. Providers of internet, telephone and TV gambling will soon see a dramatic increase in their tax bills – and this could be very bad news for players, if the costs are passed onto them. 

Online casinos are already cutting back on the promotional rewards and bonuses they offer to players, in order to offset the expected costs. With the new tax rate now in effect, the cost of gambling online could rise even further. Game odds and payouts could even be slashed.

What is Remote Gaming Duty?

Any gambling that takes place through electronic communications media – such as telephone betting, live TV betting, and all kinds of internet casino gaming – is subject to a tax known as Remote Gaming Duty. Until 2018, this was fixed at a rate of 15% on all revenue. However, the Government raised the tax level in that year’s budget, so now remote gambling is charged at a rate of 21% – an increase of 6%. This takes effect from late 2019.

Why has the rate been raised?

The increased tax is a response to a cut in Fixed Odds Betting Terminal (FOBT) stakes. These betting machines, often found in high street bookmakers, are thought to be responsible for a sharp rise in problem gambling. As a result, the government – under pressure from lobby groups – significantly dropped the maximum stake on FOBT bets. 

This is bad news for the operators, who make a large portion of their income from FOBTs. It also means a cut to public funds. Taxes on FOBT profits are now greatly reduced, leaving the government with a hole in the treasury’s purse; the new tax may mitigate this loss.

Operators and players feel the pinch

Many UK gambling operators already faced significant losses when the FOBT stakes were reduced. William Hill, for example, has reported a 12% profit slump in early 2019 – a decline of £63.5 million – and is expected to close hundreds of its betting shops. The overall cost to the bookmaker could exceed £ 1 billion by 2020. Other companies have fared better so far, thanks to strong online gaming revenues which have mitigated some of the losses. However, the rise in Remote Gaming Duty is going to seriously cut into online profits.

In order to balance out their lost profits, many gambling operators are passing some of the burden onto their customers by raising the cost of their services. Most are doing so indirectly, with a reduction in welcome bonuses, loyalty rewards and player comps. Some are even going so far as to cut the odds on their games, so the house takes a higher cut, and decreasing the prizes available. Players might find that their favourite game is suddenly less profitable, or their membership carries less perks, thanks to the higher tax rates.

Can online casinos weather this storm?

Online gambling is increasingly popular, with a huge number of online casinos establishing themselves in the past decade. From sports betting to live casino tables, many players are opting to place their bets online, via their computer or mobile phone, instead of attending a physical casino or bookmaker. Games are available around the clock, and can be played anywhere there is an internet connection. There are thousands of different game types – from online video slots to live bingo games – and many unique rewards and bonuses.

Even with the raised taxes, subsequent losses and increased prices, the online casino industry is expected to hold strong and retain players ver the coming months and years. New and advanced games, plus the convenience of mobile play, are key reasons why UK gamblers will keep flocking to their favourite casinos, regardless of the price increase. However, if the industry is hit by further taxes in future, the impact could be devastating for both small independent companies, and the country’s biggest names in online gambling.