The introduction of machine gaming duty will lead to further amusement arcade closures in the UK – that's the stark warning from BACTA.
Proposals to introduce MGD were outlined by the Treasury in May this year. These would replace the current system whereby arcades pay an annual tax for each machine owned, as well as VAT. MGD would replace these with a flat annual percentage of takings.
Although the Treasury stated that the changes should be ‘revenue neutral’, a report compiled by Ernst and Young on behalf of BACTA found that the new system would lead to some arcade businesses facing a huge tax hike. Others, it said, would be rewarded with a windfall.
“At present we have a taxation system that works and is understood by arcade owners,” said Derek Petrie, president of BACTA. “In front of us we have a proposal to discard that system and replace it with a new tax that will threaten the livelihoods of hundreds of operators at seaside resorts across the UK. The new system will introduce further complexity and a burden of compliance to an already strained industry.”
The E&Y report modeled four scenarios based on a range of potential MGD rates. Under the first of these, which would ensure taxation remained revenue neutral, the worst affected businesses would pay over £1m extra per year in tax. Those paying more would face an average additional tax bill of £400,000 – making arcade closures all the more likely.
BACTA’s own “worse case scenario” for introducing MGD – if there is no alternative – would see those losing out face an average loss of more than £300,000.
“We have seen over 200 amusement arcades close in the past two years, many of them small, family-run seaside businesses,” continued Petrie. “While the government is busy promoting UK seaside tourism with one hand, the Treasury seems intent on taking it away with the other.
“In the same week that the Chancellor argued the government has to help businesses create jobs, one of his Ministers is finalising proposals that will extinguish hundreds of them. We have consistently expressed deep concern at the structure of the proposed reforms and continued to try and present our case to the Minister in Whitehall. So far, she seems unwilling to listen.
“At the very least we urge that more time is taken to analyse these results, to talk to the industry and to consider the implications of asking small businesses to pay as much as a million pounds extra each year in tax.”
Ahead of its annual conference in London on Thursday, BACTA will be raising the issue with MPs at Westminster tomorrow.
