Increased gambling taxes may lead punters to seek out illicit markets in the UK, according to Entain's top executive's caution.
UK Gambling Tax Overhaul: Concerns of Expanding Black Market
The UK government is proposing a significant shake-up in gambling taxes, particularly targeting remote betting and sports betting. The aim is to simplify tax treatment across online gambling, but concerns have been raised that such changes could drive customers towards the black market.
Analysts at Peel Hunt have reiterated their "buy" recommendation and price target of £11 for Entain's stock, despite the proposed tax changes. However, Entain's shares fell about 3% in afternoon trading to 905p, reflecting investor unease.
Entain, along with other major gambling operators like Evoke, Flutter, and Rank Group, has seen its shares decline amid mounting pressure on UK Chancellor Rachel Reeves to raise taxes on online gambling. Rachel Reeves, in a recent TV interview, did not rule out higher gaming duties, but has not yet committed to the extent proposed by former prime minister Gordon Brown, who called for an extra £3bn from gambling taxes to tackle child poverty.
If implemented, higher taxes would have a direct impact on Entain's financials. The company has upgraded its full-year guidance and posted better than expected total net gaming revenue and earnings before interest, taxes, depreciation, and amortization for the six months to June 30. However, these tax increases could potentially erode their gross gaming revenue and profit margins, leading to higher prices or less attractive offers for consumers.
Industry bodies like the UK Betting and Gaming Council and the British Horseracing Authority warn that such tax hikes, especially sudden or steep rises, could cause "untold damage" by making licensed services less competitive. This would encourage consumers to use unregulated, untaxed operators, which offer better odds or more attractive betting conditions due to their tax advantage.
The Netherlands' experience serves as a cautionary tale. After raising gambling taxes and imposing stricter regulations, their licensed sector’s gross gaming revenue dropped by 25% in the first half of 2025, with tax income falling accordingly. The Dutch regulator and industry attribute this to players shifting to black market operators to avoid higher costs and restrictions.
The UK government claims the remote betting and gaming duty reform is not intended to increase overall rates but to align and simplify taxation. However, stakeholders remain skeptical, fearing actual rate hikes and increased regulatory burden will push punters to illegal sites as affordability checks and other responsible gambling rules tighten.
To mitigate black market growth, the government is considering consolidating into a single Remote Betting and Gaming Duty, aiming to reduce bureaucracy and create a level playing field across gambling products. Enhanced enforcement against illegal operators, including blocking unlicensed sites, is also likely to be paired with tax changes.
Some proposals link increased tax revenues to social objectives, suggesting funds raised could also support effective regulation and consumer protection, indirectly reducing harmful black market activity. Balanced tax rates that consider operator profitability and consumer affordability are also being advocated to avoid driving players underground.
In conclusion, while the UK government aims to overhaul and possibly increase gambling taxes to raise revenue and simplify tax law, evidence and expert opinion warn that excessive tax hikes risk expanding the black market. The Entain group and others could suffer reduced market share unless balanced with effective enforcement and measures to maintain consumer participation in the licensed sector.
[1] BBC News - UK gambling tax overhaul plans announced [2] The Guardian - UK gambling tax reforms could drive customers to black market, warns Entain [3] Financial Times - Entain posts better than expected half-year results [4] IPPR - Taxing online gambling to fund social objectives [5] GamblingCompliance - UK gambling tax reforms: a case study on Entain's potential impact
