Opinion: Walking blindfolded to the guillotine

Yesterday’s Budget announcement of a “point of consumption” tax on offshore operators might not feel like a re-run of Black Friday but the implications for high-growth and high-tech businesses in the sector will be just as dark.

Yet I see much of the industry walking blindfolded to the guillotine.

The problem is not GPT per se. If you have to tax gambling at source, GPT is the best way to do it. Tax the take, not the turnover. It’s like VAT, although the operator pays it rather than the customer. And that’s the problem with it.

One reason why there are so few independent bookies is that GPT favours larger operators. You need serious economies of scale to give you enough margin to be able to absorb the impact of giving Her Majesty 15p of every £1 your customer loses.

Egaming could easily go the same way if this reform goes through without any allowances or variations for smaller companies and those with a high R&D requirement relative to their income.

This industry is going through an extraordinary wave of change brought about by new tech, from smartphones and connected TVs to high bandwidth video links to domestic PCs. The way in which marketing, CRM and support are delivered are being reshaped by social media. Nothing will be the same in five years.

My feeling, from having had meetings with officials and politicians, is that they are open to a positive discussion about how this reform can be made to work for smaller companies and those investing in the new technologies.

It’s not in their interest to collapse the market to a few big players, to create a monster black market, raise no revenue, and deliver us another Full Tilt. We all want to avoid a rerun of that disaster: thanks to those idiots it’s nearly impossible for a gambling company to get a normal bank account in the UK any more.

There is also, at all levels in Government, a lack of understanding of the different situations and economics of e-gaming businesses. Not their fault, this, but ours. I have been asked by several MPs and officials why we can’t just pass on the cost to customers by changing the odds on our roulette or Slots. We need to educate – and I think they want this.

The industry has good representatives in various interest groups, such as the RGA. They have access to the right people and will make a strong case. There isn’t a voice though specifically for smaller operators whose businesses and investment plans will be at risk if a flat 15% rate is imposed.

Mark Davies and I are setting up the High Growth E-Gaming Companies Forum to try to amplify the voice of the high-tech end of the business in this process. The formal consultation is starting within days and we have very little time.

We’d love to hear from you if you have less than £10m annual turnover and an interest in this space. Please email charles@probability.co.uk or Mark.Davies@cambertonuk.com