Casino groups' shares tumble over tax hike

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The Independent Online
SHARES in casino groups tumbled yesterday as the market digested the shock decision by the Chancellor of the Exchequer, Gordon Brown, to increase gaming duty in the Budget.

Shares in London Clubs fell 35p to 232.5p and Capital Corporation slumped 15p to 126p. Both companies will be particularly badly affected by the tax hike due to their strong presence in the London casino market which will bear the brunt of the Budget changes.

The casino industry faces an extra tax bill of pounds 20m in the year to April 1999, rising to pounds 25m the year after.

The two casino operators blasted the Chancellor's decision and pleaded with the Government to reassess the situation.

A statement released by Capital Corporation yesterday said: "The company deeply regrets this punitive tax measure. Within a highly regulated industry the opportunities to pass on such a substantial increase in taxes are extremely limited, and the proposed change is likely to undermine London's pre-eminent position in the casino market."

London Clubs said the move would blow a pounds 12m a year hole in its profits. Allan Goodenough, the chief executive of London Clubs, said: "I do not believe that it was the Chancellor's intention to create a `London Clubs tax' and we shall therefore be pressing as strongly as possible to persuade the Government that this is a mistake and should be reversed."

The Government announced on Tuesday that the top rate of gaming duty payable on casinos' gross gaming yield, which is the amount left over after gamblers' winnings, is to rise to 40 per cent from 33.5 per cent from 1 April. The move will hit the larger casino operators hardest which tend to be sited in the capital. Last year more than 80 per cent of gaming duty was paid by 21 London casinos out of the total of 116 in the UK.

Shares in other casino groups dipped yesterday. Stakis, which owns a number of casinos as well as hotels, gave up 2.5p to 118p and Ladbroke slipped 1.75p to 336p.

The industry, in conjunction with the British Casino Association, now intends to lobby the Government furiously over the next few weeks in an attempt to overturn the controversial decision.

The Customs and Excise department stands to collect more than pounds 100m a year from gaming duty after the tax hike. It is a severe blow to an industry which is worth more than pounds 2.3bn a year.