Tax Hikes Won’t Solve Problem Gambling Behaviour
A common argument for raising taxes on Gambling is that Gambling is harmful and therefore high taxation is a solution to this problem.
The reality is that raising taxes on Gambling generally doesn’t increase Government revenue and does little to solve problem gambling; it makes it worse. Let me explain.
Increasing taxes don’t solve problem gambling
Raising taxes on gambling won’t fix problem gambling because it doesn’t address the root behavior of addiction.
Problem gambling is a compulsive behavior, often inelastic to price or cost changes. In other words, addicted gamblers tend to keep gambling even if it becomes more expensive or difficult.
As one research review noted, higher prices (like worse odds or taxes passed onto the player) “can have an effect on some consumers, but not necessarily those experiencing the most harm”. The underlying psychological drivers – cravings, impulsivity, escape, etc. – remain unchanged by a tax increase. So while a new tax might make headlines as a “tough” measure, it’s unlikely to deter a true problem gambler from chasing losses. Instead of reducing harmful gambling, tweaking taxes is more of a political lever that fails to address the actual addiction.
Someone in the grip of addiction does not perform a rational cost-benefit analysis of each bet – they are driven by urges and distorted thinking (e.g. “the next spin I’ll win big”). Thus, taxing the activity more heavily won’t suddenly instill self-control.
Comparable public health issues illustrate this: taxes on cigarettes do reduce casual smoking rates, but a severely addicted smoker will often pay the higher price or find alternatives. Likewise, a gambling tax hike might discourage occasional bettors, but addicted gamblers will find a way to keep betting, even if it means suffering greater losses. As we’ll explore, this can lead to perverse consequences that undermine the intended goal of harm reduction.
Example: A Slot Machine Addict’s Perspective
Consider a hypothetical example: Alice, a problem gambler, is addicted to an online slot machine. The slot has a Return to Player (RTP) of 95%, meaning for every $100 bet, it pays back $95 on average (a 5% house edge). Let’s say the operator currently pays around 21% tax on gross gambling yield (the UK’s Remote Gaming Duty on online casino revenue is 21%. With a 5% house margin, the operator’s net after tax is about 4% of wagers.
Alice, unfortunately, loses a lot of money on this slot due to her compulsive play, but the game’s RTP ensures she at least gets back roughly 95% over time – allowing her to play longer (and giving her a chance, however slim, to win occasionally and keep hope alive).
Now imagine the government dramatically raises taxes on that slot game, perhaps to 50% of gross yield (a scenario actually proposed by some campaigners. If the operator kept the game’s RTP at 95%, a 50% tax on the 5% margin would leave them only 2.5% of wagers in revenue – halving their profit per bet.
What will the operator do? In all likelihood, they will reduce the RTP (increase the house edge) to maintain profitability. They might tweak the slot to 90% RTP (a 10% house edge). This way, with a 10% margin, a 50% tax still leaves them a 5% net yield (similar to before).
From Alice’s perspective, however, this is disastrous. The game now returns only $90 of every $100 on average. She will lose her bankroll twice as fast as before, since the machine’s odds worsened to offset the tax hike.
Her addictive behavior hasn’t changed at all – she’s still playing compulsively – but now the cost of her compulsion is higher, draining her finances (and likely her mental health) even more quickly. In effect, the tax increase could perversely make problem gambling harms worse, not better.
Unintended Consequences of Tax Hikes
Beyond failing to curb addiction, heavy-handed tax increases can produce a host of unintended consequences in the gambling market.
One major risk is that excessive taxes and regulations will drive players and operators toward less regulated channels.
This claim is not mere scaremongering – it reflects real patterns seen elsewhere. For example, when the Netherlands recently hiked its online gambling tax rate from 30.5% to 34.2%, the Dutch regulator found that tax revenue actually declined by an expected €40 million, contrary to the government’s forecast of an increase. The likely reason is that some operators or high-spending customers changed their behavior (e.g. moving offshore or reducing play) in response to the higher tax burden, shrinking the taxable market. In effect, overly aggressive taxes can backfire, resulting in less money for the government and no improvement in problem gambling outcomes.
If legal operators retreat, problem gamblers don’t simply quit gambling – they shift to whatever alternatives remain. That could be unlicensed offshore betting sites or the local underground card game. In those spaces, no one is monitoring for safe gambling, and the odds (or fraud risk) are even worse for the player. So heavy tax or regulatory pressures that shrink the regulated sector can inadvertently push vulnerable gamblers into far more dangerous waters.
Another side effect is that taxes aimed at one segment can cause operators to push players toward other products. If, say, sports betting revenue is hit with new taxes or strict limits, bookmakers might intensify their promotion of online casinos and slots where margins are higher. In the UK, mixed-product promotions have been used in the past to “nudge sports bettors into slots” – for example, offering free spins in a casino if you place a sports bet.
Regulators grew so concerned about this cross-selling (since multi-product gamblers tend to experience more harm) that in 2025 they banned these kinds of linked bonuses altogether.
The fact such a ban was needed shows that operators were indeed aggressively leveraging their sports bettors into other forms of gambling. Why? One reason is that online slots and casino games have higher profit margins and, until recently, faced less scrutiny than sports betting.
It illustrates a key dynamic: squeeze one part of the balloon, and another part bulges out. A tax hike that cuts into sports betting profits may lead companies to compensate by growing their casino segment – meaning more marketing of slots, more new games, maybe lower RTPs to maximise yield. For a problem gambler, that’s hardly a victory; it just means being enticed to play (and lose) in different ways.
For operators, significantly higher taxes function like a heavy new cost. As discussed, many will respond by recouping margin through other means – reducing RTP on games, cutting back customer perks, or focusing on higher-margin products.
From an operator’s perspective, there is also much less incentive to invest in the UK, and this could lead operators to stop hiring, reduce the physical presence in the UK, stop indirect investment in various sports, hospitality and sponsorship or even move large parts of their operations to a more favourable environment.
Shifting Gambling Patterns: Sports vs. Casino
There is evidence that regulatory measures targeting one type of gambling can lead to shifts rather than reductions in overall gambling activity. A notable case was the UK’s clampdown on Fixed-Odds Betting Terminals (FOBTs) in betting shops a few years ago. FOBTs – often called the “crack cocaine of gambling” – had their maximum stake dramatically cut from £100 to £2 in 2019 to curb rapid losses.
The move was intended to protect vulnerable players. What happened? Many players simply migrated to other gambling channels. As one analysis put it, “if their cravings are unfulfilled within the betting shops, they will go elsewhere, such as to arcades and casinos”. In other words, the same individuals continued to gamble, just in different venues or on different products. In fact, those alternative options (like online casino games or arcade machines) can be just as harmful – some have even faster play speeds or higher volatility, which can be equally addictive. The well-intentioned FOBT stake cap did reduce a specific harm (extreme losses on one machine type), but it did not “solve” problem gambling.
This pattern is reflected in the gambling industry statistics. Over the past decade, we’ve seen sports betting’s relative share decline while casino-style gambling (slots, etc.) has surged. According to the UK Gambling Commission, in the year April 2023–March 2024 online casino games generated £4.4 billion in gross yield (with slots alone contributing £3.6 billion), whereas all remote sports betting generated only £2.4 billion.
In other words, online “gaming” now dwarfs online sports betting in revenue. This continued rise in online casino play has occurred even as some sports betting volumes stagnated under stricter regulation. The clampdown on certain betting products and practices – for example, tighter ID and affordability checks for sports bettors.
Source: UK Gambling Commission data, via Limelight Digital. Online casino games (slots, etc.) now account for about 64% of online gambling revenue, compared to ~35% for sports betting. Sports betting’s share has shrunk as more gambling activity shifts to online casino-style gaming.
The bottom line is that attempts to stamp out gambling harm by targeting one segment (through taxes or limits) often result in displacement rather than elimination of the harm. Without comprehensive measures that address the gambler’s behavior and choices, people will gravitate to whichever products are available – and the industry will adapt to steer them there. We end up playing regulatory whack-a-mole: cracking down on one game only for another to surge in its place.
Ignoring the Real Solutions
While politicians and campaigners focus on headline-grabbing measures like tax hikes they often neglect more fundamental solutions that could truly change player behavior.
The current debate rarely centers on measures that directly help individuals control their gambling impulses or recover from addiction. Noticeably absent are discussions of how to actually change player behavoiur to limit harm.
I’ve made several simple suggestions that are elegant in their approach to stopping problem gambling while minimising broader negative consequences. Despite offering these solutions, I’ve never been given a chance to speak in any committee or discussion. The simple fact is that campaigners and MPs are in an echo chamber and don’t want the problem of somebody actually talking sense and contradicting their position.
Think through how little tweaks can change people’s behaviour significantly without that much impact. When you next go to the supermarket for some shopping are you going to take a bag, carry your shopping or pay 20p for a new bag?
Single-use bags sold by major retailers have dropped from roughly 7.6 billion in 2014 to 133 million in 2022/23. A tiny tweak, a 98% reduction in problematic behaviour.
It’s telling that tax hikes are sometimes portrayed as a “safer gambling” measure, when in reality a tax is a revenue tool – it doesn’t educate or rehabilitate a gambler, it just raises taxes. Truly changing behavior requires deeper engagement with the gambler as a person, something that doesn’t fit in a quick fiscal policy win.
Gambling taxes as a saviour
Politicians have been leaning on “child poverty” as a justification for new or higher taxes for years, with Gordon Brown famously campaigning on it while rarely spelling out that the headline figures refer to relative poverty, not children going without the basics.
Relative poverty simply measures how far a household’s income sits below the national median, which means the numbers rise even if no-one’s actual living conditions get worse.
It’s the “Johnny from number seven gets an iPhone 17 Pro” problem: one family on the street buys something expensive, and statistically everyone else is now “poorer,” even though their circumstances haven’t changed at all.
That’s why the idea of raising gambling tax to “fix” child poverty is so incoherent. Not only is the tax unrelated, but if the measurement is relative, then the moment anyone’s income increases or standards improve for a minority, poverty figures rise automatically.
You’re left with a tax hike on an unrelated sector being sold as a moral necessity, when in reality it can’t possibly solve a metric that moves every time Johnny gets a nicer phone.
Perpetuating the Debate vs. Solving the Problem
Some of the loudest anti-gambling campaigners seem far more invested in keeping the fight going than actually solving the problems they talk about. It’s not hard to see why. Many charities, advocacy groups, and research bodies rely on funding that exists only because “gambling harm” remains a headline issue. If the problem were genuinely reduced, their grants, donations, and public relevance would shrink overnight. That doesn’t mean every campaigner is acting in bad faith – far from it – but it does create an awkward incentive: dramatic calls for tax hikes and advertising bans generate better press and fundraising than boring but effective measures like improved counselling, better self-exclusion tools, or targeted treatment.
The real challenge is to align everyone’s incentives with actual harm reduction. Imagine if taxes or levies on the gambling industry were ring-fenced for treatment and prevention, and support organisations were funded based on real outcomes – fewer addicts, fewer hospital admissions, lower prevalence of problem gambling. Suddenly the motivation shifts from keeping the controversy alive to genuinely fixing the issue.
Right now, the debate is stuck in an endless looping argument: campaigners shout at the industry, the industry pushes back, and nothing truly changes. The only winners are those whose careers depend on the fight continuing forever. A better path is obvious: combine industry data and expertise with campaigners’ passion, and make government oversight focus on measurable results. Reward groups for reducing harm, not for amplifying the scale of the problem. That simple shift would turn a moral shouting match into a practical effort to help the people who actually need it.
If campaigners were paid on results, they would be penniless. As it is, they continue to be well funded, while achieving nothing.
A Balanced, Smarter Path Forward
A healthy gambling environment isn’t about choosing between profit and protection — it’s about getting both right. The industry can operate sustainably, pay its way, and offer entertainment, while effecitve safeguards steer vulnerable players towards help rather than harm. That won’t be achieved through headline-grabbing fixes or symbolic tax rises.
Tax has a place, but only when used sensibly. Push it too far and you damage the regulated market, tighten odds, or drive people to unsafe sites. A smarter approach is a modest levy that actually funds treatment, education, and independent research — not tax hikes waved around as moral victories.
The real progress comes from practical harm-reduction measures that barely get political airtime: loss limits that tighten when someone’s chasing, regular profit-and-loss statements to snap players back to reality, or operator data-sharing to spot dangerous patterns across multiple accounts. These directly change outcomes; fiddling with tax rates doesn’t.
The truth is simple: raising gambling tax won’t fix problem gambling. It doesn’t stop addicted players, and it can even make things worse. If we genuinely want fewer people to experience gambling harm, we need education, support, and smart regulation — not another round of squeezing operators for an easy soundbite.
Effective solutions take more effort, but they actually work.