Taxing Gambling Machines to Enhance Public and Private Revenue

24 Pages Posted: 7 Oct 2020

See all articles by Thomas A. Garrett

Thomas A. Garrett

Kansas State University - Department of Agricultural Economics

David Paton

Nottingham University Business School (NUBS)

Leighton Vaughan Williams

Nottingham (Trent) Business School

Date Written: November 2020

Abstract

Electronic gambling (‘slot’) machines are a key component of the global gambling industry. We introduce a theoretical framework which shows that under reasonable assumptions, shifting from a per‐machine licence fee to a gross profits tax (GPT) on machine revenue can help to resolve policy tensions between industry profitability, economic growth and government revenue. We test the theory using data on recent changes to gambling taxation in the UK, in particular the move to a gross profits‐based Machine Games Duty (MGD). Our results reveal that the shift from licence fees to a revenue‐neutral MGD led to a significant increase in the number of machines, as predicted by the theory, and in machine revenue. These results provide useful guidance for all parties involved in the gambling taxation debate, especially those jurisdictions that are considering or are open to a change to their gambling tax system.

Suggested Citation

Garrett, Thomas A. and Paton, David and Vaughan Williams, Leighton, Taxing Gambling Machines to Enhance Public and Private Revenue (November 2020). Kyklos, Vol. 73, Issue 4, pp. 500-523, 2020, Available at SSRN: https://ssrn.com/abstract=3705437 or http://dx.doi.org/10.1111/kykl.12247

Thomas A. Garrett (Contact Author)

Kansas State University - Department of Agricultural Economics

Manhatten, KS 66506-4001
United States

David Paton

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham NG8 1BB
United Kingdom
+44 0 115 8466601 (Phone)

Leighton Vaughan Williams

Nottingham (Trent) Business School ( email )

Burton Street
NG1 4BU Nottingham
United Kingdom

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