Duty rise may force gaming underground

THE GOVERNMENT's decision to raise gaming duty could drive gambling underground and promote illegal betting according to Capital Corporation, the London casino operator. The group also claimed yesterday the tax rise would prove a devastating blow for the British casino industry, and would prompt it to look at investing overseas rather than at home.

The surprise hike in duty by Gordon Brown, the Chancellor, has forced Capital to halve its final dividend payment to 3p a share to help pay for a huge rise in its tax bill.

Capital forecasts the rise in the top rate of gaming duty to 40 per cent would have cost it almost pounds 5m last year and could have an even bigger impact on profits in 1998.

Alan Hearn, the group's chief executive, lambasted the Government's decision. "This is a very very poor, ill-thought out measure. This is going to hit our shareholders."

Capital is now calling on the Government to reverse its plans. It is also considering taking up the matter with the European Court. "We will appeal to everybody we can," said Ernest Sharp, chairman of Capital.

Capital said it was still pursuing legal action against Kenneth Thompson and Des Pereira - the group's former chief executive and finance director respectively - over allegations that they have conspired to injure the company. The litigation follows the publication of a series of damaging reports about Capital over alleged lapses in security which rocked the group.

"The wheels of the law grind slowly. However, we are very confident that we will win the case," Mr Sharp said.

Capital claimed to have drawn a line under its former problems and that it had implemented tight cost controls which had contributed to the rise in profits.

Underlying 1997 profits rose by one-third to pounds 16.4m. It was forced to spend pounds 4m of that on advisors fees to see off a hostile bid from London Clubs. The economic turmoil in the Far East where many of the group's gamblers come from, has also taken its toll on attendances.

The number of Asian visitors to Capital's casinos have fallen by a quarter.