Government to reconsider lottery tax change

Culture minister James Purnell announced on Tuesday that the Treasury will re-examine proposals to change Camelot's taxation system in a bid to increase the amount of money raised by the lottery for good causes.

Camelot applied to the Treasury in September to pay gross profits tax, which is paid after prizes to players have been awarded, rather than before (Third Sector Online, 19 September 2007). The operator argued that switching to gross profits tax, which is currently used by bookmakers and casinos, would allow it to vary prize payouts to potentially stimulate sales.

Speaking yesterday at the Commons debate on the Government’s proposal to transfer just over £1bn of lottery money to fund the Olympics, Purnell said: “I am happy to announce that my Department and the Treasury will re-examine the gross profits tax issue.”

He added: “The House will understand that tax policy is a matter for the Chancellor and would be covered in the Budget.”

The issue was also taken up by shadow culture minister Jeremy Hunt, who pointed out that Purnell’s promise of additional lottery sales worth between £600m and £1bn under the new Camelot licence relied on a change to gross profits tax.

“Those numbers are based on items in the Camelot bid document,” said Hunt. “The minister will know that they are very speculative. They depend on the Treasury’s agreeing to move to a gross profits tax, which he said has not been confirmed—he is simply prepared to consider it again.”

Don Foster, the Liberal Democrat spokesman on culture, media and sport, added that although the Treasury had been “initially very sceptical” about gross profits tax, he was pleased to see the department had now “become agnostic about it”.

Foster quoted figures from auditors PricewaterhouseCoopers showing that a change to gross profits tax would raise £400m for lottery good causes by 2019.

He also said that the review should be implemented as quickly as possible to maximise extra funds for the taxpayer and for lottery good causes.

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