§ (1) Where a person plays a game of chance by means of a gaming machine, then for the purposes of value added tax (but without prejudice to subsection (2) below) the amount paid by him to play shall be treated as the consideration for a supply of services to him.
§ (2) The value to be taken as the value of supplies made in the circumstances mentioned in subsection (1) above in any period shall be determined as if the consideration for the supplies were reduced by an amount equal to the amount (if any) received in that period by persons (other than the person making the supply and persons acting on his behalf) playing successfully.
§ (3) The insertion of a token into a machine shall be treated for the purposes of subsection (1) above as the payment of an amount equal to that for which the token can be obtained; and the receipt of a token by a person playing successfully shall be treated for the purposes of subsection (2) above—
- (a) if the token is of a kind used to play the machine, as the recepit of an amount equal to that for which such a token can be obtained;
- (b) if the token is not of such a kind but can be exchanged for money, as the receipt of an amount equal to that for which it can be exchanged.
§
(4) In this section—
game of chance" has the same meaning as in the Gaming Act 1968; and
gaming machine" means a machine in respect of which the following conditions are satisfied, namely—
§ (5) This section shall come into force on 1st November 1975.'.—[Mr. Robert Sheldon.]
§ Brought up, and read the First time.
§ Mr. SheldonI beg to move, That the clause be read a Second time.
§ Mr. Deputy SpeakerWith this new clause we may discuss the following amendments:
§
No. 5, in Clause 4, page 5, line 4, leave out subsection (2) and insert:
'(2) In section 24 of that Act (holiday season licences) for paragraphs (a) and (b) there shall be substituted the following:—
§
No. 6, in page 5, leave out lines 4 and 5 and insert:
'(2) In section 21(2) of that Act, for paragraph (b) there shall be substituted the following:—
(b) a holiday season licence (for twopenny machines only) for the period from 1st March in any year to the last day of February next following, being a licence which authorises the provision of machines on premises on any day during the period from 1st March to 31st October, and on Saturdays, Sundays and Statutory holidays only during the remainder of the period for which the licence is granted.".
§ (2A) In section 24 of that Act (holiday season licences) for "penny" there shall be substituted "twopenny" and for "£15" there shall be substituted "£10".
§ (2B) In sections 25(5) and 26(4)(a) of and paragraphs 8(3) and 12 to that Act, for "penny" wherever occurring there shall be substituted "twopenny".
§ (2C) In section 27(2) of that Act, for "penny machine" there shall be substituted "twopenny machine", and after "single penny" there shall be inserted "or (d) a single twopenny coin".
§ (2D) In paragraph 5(3) of Schedule 4 to that Act, for "31st October" there shall be substituted "the last day of February".'.
§
No. 7, in page 5, line 5, at end insert:
'(3) In section 21(2) of that Act, for paragraph (b) there shall be substituted the following:—
(b) a holiday season licence (for penny machines only, or for twopenny machines only, or for a combination of penny machines and twopenny machines only) for the period from 1st March in any year to the last day of February next following, being a licence which authorises the provision of machines on premises on any day during the period from 1st March to 31st October, and on Saturdays, Sundays and Statutory holidays only during the remainder of the period for which the licence is granted."'.
§ No. 8, in page 5, line 40, after '(2)', insert (2A), (2B), (2C), (2D)'.
§ Mr. SheldonNew Clause 5 provides that facilities for the playing of a gaming machine constitute a supply of services, the consideration for which is the amount that will be paid into the machine. The new clause provides that the VAT calculation is made on the basis of the net 1540 takings of the machine, that is the money that is actually paid into the machine less the amount of winnings. This will be the general rule except where goods are given in exchange for tokens won from the machine. In that case the input tax on the goods will be deductible in the usual way, and to calculate VAT on the net take would in effect give double relief from VAT. That is the general position of the new clause.
I think that the intention of the new clause is quite clear, but as it is being taken with the amendments, it might be for the convenience of the House if I responded to the various points that will be made in the debate and the many points that I know will arise on the amendments and the new clause.
§ Mr. WigginMy name appears on a number of amendments which I shall attempt to move, but first I should like to comment on new Clause 5. The British Amusement Catering Trades Association represents a very large majority of the people who manufacture and operate these machines. It carries out that task as I am sure the Treasury Ministers will agree, with considerable lucidity and skill.
However, that association takes the view that this clause is merely a small contribution to justice. It is a welcome concession, but it is only a relatively small means of helping this industry. I do not think anyone would claim that the industry is of vast material importance to the national well-being, but it provides a considerable amount of revenue to the Treasury and, of course, a certain amount of employment in constituencies such as mine where not only are these machines used by holiday makers for entertainment purposes but they are also manufactured in quite large numbers and exported abroad.
The Financial Secretary's assessment of the new clause is correct. The levying of VAT on each coin inserted into a gaming machine or an amusement-with-prizes machine is, of course, always done on the residue after the prizes have been paid back. Therefore, VAT on gaming machines is to all intents and purposes a tax on the machine operator. It is not, as in most other cases and as the tax was envisaged, a tax on the user or consumer of the service.
1541 5.0 p.m.
The purpose of the amendments is to make it possible for seaside arcade operators, in particular, to increase their earnings to meet the heavy burden of VAT.
The trade has calculated that the effect of the proposal to levy VAT on the takings of machines will double the tax that is currently being borne, even after due allowance has been made for the Government's proposal to make some slight reduction in gaming machine licence duty.
Regarding premises used wholly or mainly for the purpose of amusement—for example, seaside arcades—the whole of the operator's overheads must come from machine earnings. The proposed combination of VAT and gaming machine licence duty will in most cases eat up 40 per cent. of what is left to the operator after meeting overheads. This is a swingeing increase which, I am sure, is quite disproportionate to the real intentions of the Treasury even in its most grasping mood. The British Amusement Catering Trades Association has taken up the problem behind the scenes with the Treasury hoping that something could be done to enable seaside arcade operators in particular to bear the new additional tax by making it possible for them to earn more money.
A holiday season licence permits the operation only of penny machines from 1st March to 31st October. The proposed rate of duty is £7.50 per machine. The first effects of the amendments would be to permit the operation under a holiday season licence of penny machines at the proposed rate of £7.50 and 2p machines at the higher rate of £15 per machine.
Secondly, the operation of machines would be allowed under a holiday season licence at any time between 1st March and 31st October, as now, and additionally on Saturdays, Sundays and public holidays during the rest of the year. It is in this widening of the use of machines that to some extent a concession is being sought.
I should emphasise that the present restriction on the use of penny machines has been outdated by the effects of inflation. The amendments can be advantageous to the Treasury only because they 1542 would have the effect of producing more revenue from both the gaming machine licence duty and VAT. That is the difference between these amendments and amendments which were tabled in Committee.
The objections raised by Treasury Ministers in Committee boiled down to the fact that they did not agree with my figures. They would not accept that the revenue position was as the trade proposed. But are they prepared to argue over these amendments which would seem to have the effect of not only increasing, not reducing, revenue but of creating enough income for the operators to pay this swingeing increase in tax.
The seaside arcade operator is a fairly innocent person. I do not think that he is out to sop the British people with the evils of gambling. I am sure that hon. Members will remember from their childhood days, as those with children of the age who enjoy going on seaside piers know, that these machines give a considerable amount of relatively innocent entertainment. They also provide a considerable amount of duty to the Treasury. I hope, therefore, that these relatively small amendments, of no massive commercial or fiscal importance, but which will mean a good deal to a small section of the community, will be found acceptable by the Government.
§ Sir Anthony Meyer (Flint, West)I have no interest to declare, my youngest daughter now having passed the age at which she spent large sums of money on these machines.
I speak at the request of amusement operators in my constituency whom I know well and who are as decent a bunch of chaps as one could hope to find.
I do not want to go into technical details, because they were largely thrashed out in Committee. Indeed, my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) has covered the technical side so far as it is appropriate to do so.
I want to deal with only one aspect of this matter. My hon. Friend spoke of enabling seaside operators to operate over a longer period during the year. In most British seaside resorts the season is distressingly short, and that has a large number of consequences. One is an 1543 appallingly high unemployment rate during the winter months. Anything which can be done to lengthen the season is clearly desirable on many grounds if it can be done without any great cost to the revenue. As has been pointed out by my hon. Friend, any reduction in the rate of taxation would be more than compensated by higher turnover. Therefore, it is desirable that anything that can be done to lengthen the season should be done.
I know that some hon. Members—I do not think that any are present at the moment—regard seaside amusement arcades as places of sin into which no respectable man, woman or child should be admitted. That kind of mentality flourishes occasionally within the more puritan element of the Socialist Party. It is tempting to say that people should spend their leisure time in more improving ways. Anybody who has had the misfortune to visit countries where people are encouraged to spend their leisure time in more improving ways knows how dismal the consequences are and what fearful places Soviet resorts, for example, have become where this kind of innocent—I do not think that "flutter" is the right word—way of losing one's pennies is regarded as bad.
I hope that these happy, cheerful and extremely noisy places will and are enabled to continue to operate over a longer period during the year. For that reason, I hope that the Government, while not necessarily accepting the amendments in the exact form in which they are cast, will feel able to go a little further than they have gone in the new clause to enable seaside operators, who are so different in character from those who operate in the big cities, to go on working for most of the year.
§ Mr. W. R. Rees-Davies (Thanet, West)There are two important aspects to be considered. First, the penny machine has for many years been regarded by the Treasury as a separate object. It has always been regarded as being outside the element of gambling and, as such, something which could be assisted.
Today the penny machine, in virtue and in truth, is really the twopenny machine. Therefore, it is only right that 1544 what used to be the old penny machine should be regarded as the twopenny machine of today.
The amendments would carry that proposal into effect quite well. I think that is wholly reasonable. The amendments should be attractive to the Treasury because, instead of getting £7.50 for the penny machine, it will make up its revenue with a £15 fee. Therefore, whilst there is an advantageous yield to the amusement trade operator and no disadvantage to the player who is content to pay twopence on these machines, there is a considerably higher yield to the revenue. This is one area where the revenue can get an additional yield in a harmless way. Seldom do we find proposals which are attractive to the Treasury, on the one hand, and also to the trade, on the other.
I suggest that this proposal could be of some benefit to amusement trade operators, particularly in seaside resorts. They are having a difficult time now. My postbag has been full of letters from many operators in the Isle of Thanet, which is one of the principal areas concerned. Indeed, not only in the Isle of Thanet but in other places there are many people who lead this particular industry in the production of machines not only for export, but for the home market.
Here is a case where the Treasury has nothing to lose and everything to gain by making the concession. I do not know whether it can make it here and now, today, but it is one to which I submit it should give very careful consideration and introduce it shortly in an acceptable manner.
With regard to the VAT, on which a concession has been made, the whole of the money which has to be paid out from the machines is paid to the persons concerned by way of prizes, and therefore there is nothing to be gained by the operator in respect of those concessions. The money goes into the machine and he is bound by a very limited return on it.
In relation to other matters on which operators have to pay the tax, their turnover has not increased at all in the current year, and the only way in which they can get an additional income is by raising the tariff rate from 1p to 2p. 1545 There is no other way in which they can get any other accretion of income to meet their ever-rising overheads. I hope that in those circumstances this matter can be dealt with satisfactorily.
I am sorry, Mr. Deputy Speaker, that there are other aspects of gaming and licensing that we are not able to deal with on Report, but I hope that when considering these matters Her Majesty's Government will recognise that there are other aspects of Clauses Nos. 2 and 4 on which at least satisfactory representations need to be made, whether we are dealing with gaming machine licences or with casinos, which have not been fully canvassed in the course of the Standing Committee proceedings.
§ Mr. SheldonThe amendments are basically similar. In particular, Amendment No. 5 and part of Amendment No. 6 seek to extend the holiday season licence, which is at present concerned with the 1p machines, to premises providing 2p machines. Amendment No. 5 suggests that the duty in the case of a holiday season licence should be £10 for each machine, and Amendment No. 6 proposes that the duty should be £7.50 for a 1p machine and £15 for a 2p machine.
I should like to deal at the same time with Amendment No. 7 and the remaining part of Amendment No. 6, which would extend the validity of the holiday season licence, which at present covers the period 1st March to 31st October and is spread over most of what would be regarded as a normal holiday season, which is the point made by the hon. Member for Flint, West (Sir A. Meyer). Amendment No. 7 and part of Amendment No. 6 would extend the licence to the 12 months period from 1st March to the end of February, but in the period 1st November to the end of February it would authorise the use of machines only on Saturdays, Sundays and statutory holidays. The part of the amendment which proposes extending the validity of the holiday season licence to Saturdays, Sundays and statutory holidays in the off season would pose very real problems of control.
Amendment No. 8 seeks to make consequential amendments to the Bill. There are one or two things wrong with the drafting of Amendments Nos. 5 and 7. We have not concerned ourselves with 1546 these, accepting that the intention is quite clear, and I am speaking to that. The cost of the proposals would amount to about £300,000 in a full year.
The hon. Member for Weston-super-Mare (Mr. Wiggin) pointed out that in his opinion the profitability of these machines after VAT, gaming machine licence duty and overheads have been paid, will not be very large. This may be so. I hope that, following the passage of this legislation, we shall have more information, and, if these figures are similar to those which the hon. Gentleman has suggested, obviously we shall want to look at this matter very closely.
5.15 p.m.
The hon. Gentleman may not be aware that in very many aspects of Customs and Excise and Revenue work we are able to make estimates—all Governments would consider this to be quite essential—as to the impact of the taxes levied upon the profitability or otherwise of the concern which is taxed. This is desirable and is usually achievable. In this case it is much harder to assess. The consequence of this legislation will mean that it is easier to assess. Thus on some future occasion, when we may be debating this point, hon. Members on both sides of the House will be able to speak with greater knowledge, because there will be certain information available to them which is not available now. This can lead only to a more informed decision, which I am sure is something the House would wish.
Concerning the level of the coin suitable for a holiday season licence, the proposal is made that it should be increased to 2p. The 1p machine has been selected in the past as being a suitable one for a holiday season licence, but it is suggested that, because of inflation, and the way it impinges on profitability, this needs now to be changed to 2p. The hon. Member for Weston-super-Mare made this point as also did the hon. and learned Member for Thanet, West (Mr. Rees-Davies).
This will have to be looked at very carefully. I have gone into it myself, and clearly there comes a stage where, assuming that other things remain equal, one would need to move in this direction. I have ensured that the Customs and Excise authorities will be putting this under review as the operation of the value added tax on gaming machines gets under way 1547 and we are able to see the effect of VAT in this field more clearly in many respects than one saw the effect of the gaming machine duties. Following upon that, we shall be able perhaps to come to a decision based on the light of experience and come back to the House at some future date.
§ Mr. WigginI found the answer given by the Financial Secretary to the Treasury to be far from convincing. The quite reasonable plea was that the licence should be extended to Saturdays, Sundays and public holidays. This would give considerable pleasure to visitors to seaside resorts in the winter months when, despite the philosophy of the Treasury, there are a considerable number of visitors.
The Minister said that it would not be possible because it would be too difficult to control. This I fail totally to understand. Here is an industry with a few centres in which the arcades are concentrated and where one Customs and Excise official could check very quickly, without the slightest difficulty, on the activities in a whole town. Indeed, the officials are quite prepared to check far more miniscule matters when the Treasury thinks it suitable to do so.
On the question of the effect of taxation changes upon this industry, one comes back to the ludicrous argument that the Government will wait and see. When the animal is dead, they will agree that it had a disease.
Only today I have been talking to people in the boat industry, which is quietly collapsing. When the Government find that it has been totally extinguished they will no doubt say that they have made a mistake and want to put it right. Here the Government say that they cannot believe the information until everybody has been bankrupted or put into severe financial difficulties. The purpose of the exchange of information from associations and others during the debate on this Bill should be to enable hon. Members to put up logical and responsible arguments. I do not believe that this association or any of the others would dare pass on this information to hon. Members on either side of the House if they did not genuinely believe it.
1548 I accept the Treasury argument that of course they will make out the best case that they can and that they may even exaggerate the figures and disagree about them. But this House cannot get away from the fact that, when VAT is passed on to the end product, even the most elementary mathematician can see that it has a grossly disproportionate effect. This was a consumer tax levied upon the user of the service. Because of the difficulties of these coin machines, VAT does not fit very well into this industry.
As for our request with regard to 2p machines, I had not thought that it needed the mandarins of the Treasury to prove that over a long period of time people have found that the 2p coin is now equivalent in many people's minds and, sadly, in reality to a 1p coin when the legislation was first introduced. In fact, it is the coin which people have in their pockets.
I am sorry that this minor matter has not received a very favourable response from the Treasury. However, we glean a grain of hope from feeling that perhaps the Treasury will continue to listen to the association's view during the coming months and that it may even take action during the season if it proves necessary, so that whatever chance there is of recovering some of this swingeing imposition can be taken advantage of.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.