26 November 2003
SPEECH BY ECONOMIC SECRETARY JOHN HEALEY to British Amusement Catering Trade Association (BACTA) annual conference
I’d like to thank BACTA for asking me to speak today at your Annual Convention. I welcome this opportunity to address representatives from such a diverse industry.
You are an important dynamic sector in the UK’s economy, employing around 23,000 people in a range of areas – from design to manufacturing, supply to maintenance.
You generate considerable revenues, for the Exchequer and the leisure and tourism industries. And you provide entertainment and amusement for people in many ways and in many different environments.
It is also the right time to talk to you – given that this event has fallen just after the close of our Amusement Machine Licence Duty review and consultation exercise, and a good time to reinforce the relations between you and Customs and Excise and the Government as a whole.
And I’d like to thank BACTA for its input into the review, which has been very valuable – not least because of your wide perspective across a diverse industry.
The data has been hard to collect and to collate, but you are a good guide to just how it is on the ground in your industry.
I would in particular also like to thank Phil Jarrold and Tim Batstone for the work they have done to maintain this open and constructive dialogue with Customs and Excise over the last few months.
I hope this dialogue will continue in the future – it is in both our interests to maintain it, as there is undoubtedly change on the horizon for the gambling industry.
In the last two years the Government has made significant strides to modernise gambling duties within the wider gambling industry – duties that have remained essentially unchanged for over 30 years.
One of the most successful of these has been the reform of the general betting duty, which removed the tax burden from the punter in favour of a tax on the bookmakers’ gross profits.
Following the reforms, bookmakers’ turnover has gone up by 40 per cent. Smaller bookmakers have particularly benefited by capturing a greater share of this increase. They also now pay proportionally less of the duty. Added to this, 2000 new full and part time jobs have been created within the industry, and the move to off-shore betting has been halted.
Importantly, this in turn has allowed for innovation and development within the betting industry – in terms of both new business and new products.
More recently, we have abolished bingo duty – replacing duty on the stakes and added prize money of bingo players’ with a 15 per cent gross profits tax.
This new tax system was introduced last month and we believe that it will provide a welcome boost to the bingo industry. We will work closely with the Bingo Association to monitor and assess its impact on industry.
Although these reforms have been successful, we know that it would be wrong to assume that what has worked well for one sector of the industry would necessarily work well in another.
I do understand that there are unique and specific challenges to be faced in any possible reform of your sector of the gambling industry – not least because gaming and amusement machines in fact cut across a number of different sectors.
With your help, we have sought to review the taxation of gaming and amusement machines. We feel that this review is necessary, not just because the current system is out-of-date, but needed if the industry is to face up to the challenges of fast changing competitive, regulatory and technological sets of circumstances. Tim Batstone’s President’s Review identified the impact of the taxation review as one of the “two biggest challenges” facing BACTA.
We have received, as you’d expect, numerous comments on the complexity and cost of administering the current system – which many businesses consider burdensome and unnecessary.
We have also received comments on how cumbersome many of you find the licence surrender system. And I understand that some of you have concerns about the additional premium attached to short licences.
As a trade association you have recognised these concerns, and have made some helpful proposals for modernising the way we collect machines tax.
We are looking at these proposals carefully and I know that officials have had detailed discussions to talk about how these might work in practice.
But any reform must be about more than administration and the cost of compliance. We need a regime that does not hinder technological development and innovation in the industry.
Essentially we will strive for a tax that is both simple to administer and simple to collect. And, of course, one that is fair.
This is not straightforward in an industry where individual machines are situated in tens of thousands of locations around the country – from casinos, bingo halls, and amusement arcades to pubs, clubs and seaside resorts, and it’s partly because of this diversity, we believe, that the existing Machine Licence Duty has tended to lead to uneven tax burdens. For example, operators pay a set amount for a licence irrespective of whether the annual income from the machine is £2,000 or £22,000. This suggests that smaller operators face an unfair burden.
And having a specific duty can create barriers to entry – with some operators choosing not to site machines because they are uncertain about whether they can generate enough profit to cover the up-front payment.
Beyond that, I know certain parts of the consultation document have proved to be controversial with your members and with the members of other trade associations.
I know that a possible move away from the specific licence duty and the introduction of a gross profits tax on machine takings in its place has generated a lot of debate. Our review asked for opinions and data on this option, and we have received lots of both – in fact a very mixed bag.
Officials in Customs have worked hard over the summer to talk to as many associations as possible about possible reform of machines taxation.
As you know, the formal consultation on AMLD came to an end in early October.
And we received a good number of responses to the consultation. Since then we have been analysing the responses and working with you and others to interpret the figures and secure more data to inform a detailed analysis of the options.
I’d like to thank BACTA for the data that they have collected – which will help us to model and understand the impact of some of our options. Delving into the detail of the data for such a diverse industry is tricky and I know that my officials in Customs are keen to work further with the industry – and with you – to firm up some of those details where they can.
We have also appreciated your views on gross profits tax and whether or not VAT should remain alongside any such change in the system.
And we are grateful for the work that BACTA has put into the proposal for self-licensing, which Tim outlined just a minute ago.
Let me also make it clear that we understand your concerns about the timing of this review.
For the reasons already outlined, the time is ripe for us to review AMLD and see whether it is fit for purpose and fit for the future of a gambling industry that is developing very rapidly. This is something that you yourselves have recognised in your proposals for self-licensing.
But there are obvious links between any changes in machines taxation and the Gambling Bill, and we want to ensure that any changes in social regulation and taxation move in step.
We certainly appreciate the fact that the industry has given us a greater understanding of how the relationship between the timing of tax reforms and regulatory reforms are played out on the ground.
In closing, I recognise concerns and views that have been expressed by the industry about possible reform.
Tax reform does, inevitably, have to be assessed against a wide range of objectives – but I know that there is still more to do to get this reform right.
I am also convinced that it is important, wherever possible, for us to work together, so that you can get your views across clearly, and we make better policy decisions as a result.