UK gambling has been warned that the Labour government is reviewing proposals to increase taxes on the sector by up to £3bn.

One think tank – the Institute for Public Policy Research – has proposed doubling tax on ‘higher risk gambling segments’, whilst the Social Market Foundation takes the more blunt measure of doubling tax on online gambling from 21% to 42%.

Speaking on the latest episode of iGaming Daily, Ted Menmuir, SBC’s Content Director, said: “There are always speculations of tax being increased on sectors such as gambling, tobacco and alcohol.

“Since the election, the Labour government has stuck to the script of letting the Gambling Act Review conclude and setting the new terms for the industry. This is a fiscal nightmare for leadership, the handling of an instant doubling on tax rates and it would have consequences across the value chain and the growth profile of the industry.

“The timing of this probably couldn’t be more tricky for the industry as we adjust to white paper implementations and new regulatory framework. A doubling of tax at this time would be really challenging.”

The proposed tax rate has been met with a strong reaction from the industry, led by the Betting and Gaming Council (BGC), which described the think tanks as playing “fantasy economics”.

They added that “comparable markets abroad, which have imposed draconian regulations and disproportionate tax regimes, have seen a spike in illegal black-market gambling.”

Also present on the podcast was Joe Streeter, Editor of CasinoBeats, and he suggested that there could be an “exodus of operators from the UK” if tax rates were doubled which would lead to a “negative effect on players as there will be a less competitive market”.

“Once you get past the 50% tax charge, it really changes all the dynamics at play in your gambling market and what it offers to consumers,” agreed Ted.

“On the sportsbook level, it would mean a worsening of the overall product quality and a really limiting down of the secondary markets and revision across all cost controls. You’d be looking at less markets, less data rights and less APIs on individual markets.

“The other big factor is that you’re imposing this taxation rate on a growth market. The UK is still growing and you have to factor in job losses and the productivity of the market, which at the moment is going through a growth stage online. The impact would probably lead to high street closures as operators throw their chips online and say that’s the growth segment.”