The latest report from PwC reveals a striking connection between elevated gambling taxes and increased black market gambling activities in Europe. The Betting and Gaming Council is using these findings to argue against potential tax hikes in the UK’s upcoming Autumn Budget, orchestrated by Chancellor Rachel Reeves.
The report, “Impact of the taxation and regulatory environment on European online betting and gaming markets,” highlights how stringent regulatory environments and high taxation rates are directly correlating with the growth of unregulated gambling markets. Countries with more prohibitive tax regimes tend to see a greater portion of their gambling market shift to offshore, unlicensed entities.
For instance, in France, a country with substantial gambling taxes, 57% of its market activity occurs through black market channels. Similar patterns are observed in Sweden and the Netherlands, with 35% and 37% of gambling activities operating outside the regulated framework, respectively. However, Spain and Denmark, with their more moderate tax rates and open licensing systems, report only about 11% of gambling activities taking place outside the regulated sector.
The report underscores that approximately 5% of all online gambling in the UK now occurs on unlicensed platforms, a notable increase from 3.3% in 2021. This rise represents hundreds of millions of pounds in untaxed and unregulated transactions. The Betting and Gaming Council warns that the current trajectory, if left unchecked, could result in the UK resembling the French or Swedish markets, where black market gambling is rampant and contributes nothing to public revenue or player protection.
Importantly, the analysis from PwC challenges the prevailing notion that higher gambling duties lead to increased public revenues. Between 2019 and 2024, jurisdictions with gambling taxes below 25% of gross gaming revenue experienced a 13% annual growth in tax receipts. In contrast, those with higher taxes saw only a 9% growth, suggesting that lighter taxation could foster healthier market expansion and, paradoxically, yield higher revenues over time.
Operators in high-tax environments often reduce their marketing efforts and promotions, making licensed platforms less appealing compared to their unlicensed counterparts. The report details how operators adjust to these environments by modifying pricing strategies, cutting down on bonuses, and reducing spending, thereby making it less enticing for players to engage with regulated offerings.
As the UK Treasury prepares its Autumn Budget, discussions are abuzz regarding potential adjustments to remote betting and gaming duties. A significant increase from the current 21% to 50% is being considered, with many Labour and Liberal Democrat MPs supporting this proposal. On November 26, Chancellor Rachel Reeves will announce whether she intends to implement such a substantial increase or opt for a more moderate rise. However, she has hinted at the need for some increase in online gaming taxes.
Grainne Hurst, CEO of the Betting and Gaming Council, voiced concerns over the potential impact of higher taxes. She remarked that the UK currently enjoys one of Europe’s safest gambling markets. Still, without cautious policymaking, it risks resembling countries like France and Sweden, where large black markets offer no tax contributions, player protections, or economic support.
Hurst emphasized the importance of balanced regulation and equitable taxation in safeguarding players, boosting public revenue, and sustaining employment. Unlicensed operators, she noted, fail to provide these critical benefits, thereby undermining the market’s integrity and economic contributions.
While the report makes a compelling case against steep tax rises, some experts argue that higher taxes are necessary to curb gambling addiction and protect vulnerable individuals. They suggest that a higher tax could deter excessive gambling and ensure that a portion of gambling-related proceeds are allocated to public health initiatives and addiction programs.
The debate over the appropriate level of taxation in the gambling industry reflects a broader tension between generating public revenue and ensuring consumer protection. As the UK deliberates its fiscal policies, the challenge lies in finding a balance that supports economic growth while mitigating the risks associated with gambling.
With the Autumn Budget announcement approaching, stakeholders from various sectors await Chancellor Reeves’ decision, which could have far-reaching implications for the gambling industry and public finance. The debate highlights the complexities of regulating a sector that is both a significant source of public revenue and a potential risk to public health.
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