Charlie Parker: Betting tax hike would knock racing for six
As the government looks to raise funds, it has turned towards what perhaps is an easy target: the betting operators. The Treasury recently launched a consultation on gambling tax rates. Bets on sports, including horseracing, are subject to a lower tax rate, currently 15% of profits for bets placed both online and in betting shops. Bets placed online on casino and slots are currently taxed on profits at 21%. The proposal is to harmonise the rates to make the Treasury’s life easier and less complicated; in essence this really means increasing the 15% up to the online rate and maybe even beyond.
Anyone who has filled in a tax return will testify to the fact that the tax system is about as far away from being simple or harmonised as you can get; this is simply a way of raising more tax revenue. If this was to happen it would have hugely damaging consequences for the financial viability of British racing.
It is difficult to quantify the cost if the rates were brought into line, but it is likely that an increase in the tax paid by the operators on their sports-betting businesses could be as much as £175 million, with the share from racing contributing around £40m. Obviously the operators have tools that they can use to mitigate their tax burden. The sports betting product is more expensive when set against the very high margin online casino and slots. A levelling of the tax rate will inevitably drive business models towards their low-cost, high margin products, which have much higher incidences of gambling addiction, and away from sports betting, thus reducing existing revenue streams for racing, namely levy and media rights.
In addition, a canny operator will look to squeeze existing sports betting margins, which would likely increase the move to black market operators, producing damaging consequences for both revenues and the safety of punters.
The BHA is leading the industry’s response to the consultation, which will conclude in July. The damage to the rural economy could threaten the 85,000 jobs and £300m in tax revenues that British racing contributes and could continue to undermine our position as a leading racing nation in an increasingly competitive global environment.
We also need to offer workable alternatives that would benefit racing’s income. We still have the unresolved levy review and if there is a mutually beneficial change to the tax rates, the proposal may not be as scary as they seem. In the next ten weeks we will need to mobilise the lobbying resources at our disposal and make sure that we get our messages across whilst providing alternatives that could help the industry.
Whilst we continue to be battered by headwinds, there are many undeveloped opportunities that the industry has still not exploited. We are in essence a data-driven sport – form, ground, distance, running style, trainer form and historical information are all used to inform and frame the betting markets. As an entire industry, we also have detailed data on trainers, owners and racegoers while the betting operators have huge insights into what the same customers want. However, the siloed legancy approach and lack of output across the industry’s central data and technological capabilities means we remain in the dark ages when compared to most customer facing businesses.
Your supermarket knows what you buy and what to sell you and your online retailer has sophisticated software to entice you and sell their products. The technology landscape is rapidly changing, with the use of AI now featuring heavily across many sports and businesses, and a step change is quickly needed if we are to catch up and compete.
An industry-led and well resourced digital approach will quickly elevate the way the sport communicates, sells, recognises and rewards our customers. This is turn has the potential to unlock huge benefits for British racing in terms of driving engagement, retention and growth. Whatever the outcome of the various tax and levy discussion, it is incumbant on industry leaders to concentrate on securing the future racing product to bring about growth.
Finally, it was a sensible reversal by the BHA of the rule to cancel certain races with less than four runners. Whilst the trial was an attempt to improve competitiveness and make racing more attractive, the current ground conditions were making the situation more difficult, and created significant frustrations for participants. As owners know, anything that improves our chances of a win must be welcomed.