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Betting tax abolished: Government taking pounds 260m gamble with new reforms; Treasury not expecting to reap benefits of radical move until 2005.

Byline: Howard Wright

THE Government is taking a pounds 260 million gamble on the UK betting industry over the next three years, and does not expect to start getting its money back from the new tax structure announced in Wednesday's Budget until at least 2005, writes Howard Wright.

The figures emerged yesterday, as the dust settled on Chancellor Gordon Brown's historic decision to replace the current general betting duty of 6.75 per cent on punters' stakes with a 15 per cent tax on bookmakers' gross profits.

Scrapping the nine per cent deduction from punters, which the betting industry has promised to do as soon as the new regime comes into place, will reduce Treasury revenue in the short term, a Customs and Excise spokesman confirmed yesterday.

"But the benefits have to be measured in the medium term," he added. "The extra domestic and international betting turnover which the reform should generate will enable both the betting and racing industries to prosper, and Government revenues will share in the gain."

Customs officials commissioned an independent economic analysis of the tax options from Professor Leighton Vaughan-Williams, of Nottingham Trent University. His report is understood to have backed up a submission from the Levy Board's Bookmakers' Committee-compiled by Europe Economics-and provided the basis for the decision by Customs to recommend a 15 per cent gross profits tax.

In the last financial year, 1999-2000, duty returns totalled pounds 492.4 million, from turnover of pounds 7.3 billion.

Results from the first ten months of this year suggest the figure will be within one per cent, allowing that higher than average racing abandonments will eat away at inflationary growth.

The new scheme is due to be introduced no later than January 1, 2002, and, according to Customs, the cost to the Treasury in lost revenue between January and April 2002 will be pounds 45 million, followed by a first full-year fall of pounds 145 million.

As the effects of the measure begin to show through, the revenue loss is forecast to halve in 2003-4 and reach break-even point the following year.

Europe Economics' report calculated that 15 per cent GPT could generate between pounds 500 million and pounds 1 billion for Government revenues from such as increased Corporation Tax and National Insurance. Customs' calculations took account only of general betting duty.

The Customs spokesman said: "The two elements we had to consider in our forecasts were what would have happened if we had done nothing, and what would happen as a result of the measures we recommended."

Customs also considered what impact the removal of punters' deductions would have on illegal gambling.

The spokesman said: "This reform will remove any incentive for illicit gambling and should help eradicate the illegal, untaxed market in betting, which is currently estimated to be worth about pounds 500 million a year."

nOn-course bookmakers are being spared the imposition of a gross profits tax, as bets placed on the racecourse and at greyhound tracks will remain exempt from duty.

But bookmakers operating at other sporting venues, such as soccer grounds, may soon be caught up in GPT, according to the statement from Customs explaining the duty reforms.

It says: "The Government will be consulting on whether to retain the on-course exemption for betting at other sports venues, or to bring betting at these venues into the new system."

However, punters have been assured that in either case, the Government believes they should not be charged deductions on bets.

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Gordon Brown: announced reforms in Budget
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Title Annotation:Sports
Publication:The Racing Post (London, England)
Date:Mar 9, 2001
Words:588
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