Taxman to be lottery spoilsport

SUCCESS of the national lottery - unveiled last Friday as the 'Government's Christmas present' to the nation - is already under threat because of the Treasury's determination to claw back at least 15 per cent of the takings in tax.

Senior Tory MPs fear that the lottery could flop if Peter Brooke, Secretary of State for the National Heritage, fails to win a fierce inter-departmental battle against the Treasury for a less stringent tax regime. He wants to ensure a combination of high prizes and adequate support for charity, arts, sport and environmental projects.

The Treasury's tax plans mean that no more than 20p of a pounds 1 lottery ticket would go to good causes. This will dash hopes that as much as one third of a possible pounds 3bn turnover could go on projects - including those to mark the year 2000 under the auspices of the Millenium Fund.

Norman Lamont, the Chancellor, who will fix the tax level in one of next year's two budgets, is already under pressure to tax football pools at the same rate as lottery takings to ensure a 'level playing field' between the two forms of gambling. The pools are taxed now at 37.5 per cent.

Sixteen Tories are among the 120 MPs who have already signed an Early Day Motion demanding equal treatment for the pools. The pools are lobbying fiercely for their case that up to 3,000 jobs will be at risk because of competition from the lottery once tickets come on sale - from 1994, according to the plans.

The Treasury has long been sceptical about the lottery and has been determined to ensure that it should be 'tax neutral' - in other words that it should not lose revenue if and when people switch expenditure from other items, including other forms of betting, to buy their lottery tickets.

Mr Lamont's orginal proposal after the election was to tax lottery takings at 20 per cent - leaving a mere 15 per cent for use on heritage projects after money for administration and prizes had been deducted.

Almost every successful national lottery elsewhere in the world gives between 48 and 52 per cent of takings away in prizes, while adminstration costs are estimated at 15 per cent.

The Heritage Department is arguing that the Treasury's tax demands take no account of the extra revenue brought in by increased construction and other business activity generated by projects allocated funds from the lottery takings.

The Department is also arguing that the cash spent on its heritage and recreation programmes should amount to well over 20 per cent. Otherwise, it has told the Treasury, potential punters will be deterred by losing one of its most appealing selling points - the worthwhile nature of the use made of the lottery profits.

Mr Brooke promised on Friday that the lottery - the first in Britain to be regulated by the state since 1826 - would offer at least pounds 14m of prizes each week. There would be regular prizes of pounds 1m.

One problem for the Heritage Department is that it orginally underestimated the proportion of cash that would be needed for prizes. The first assumptions were that the turnover would be split roughly three ways, among prizes, taxation and administration, and good causes.

(Photograph omitted)

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