MPs have considered plans for a gross profit tax for bingo set out in the government's Budget legislation.

A spokesman for the Treasury told ePolitix.com: "The Bingo Association is simply wrong to suggest that recent changes to tax on bingo will not deliver benefits to the industry or players. This is a £25 million a year tax cut to the industry, of which almost £19 million will go to players in prizes. Independent research forecasts an increase of almost £74 million - 63 per cent growth - in annual profits for the industry as a result of the changes.

"These benefits, which will help smaller clubs most in need of support, are substantial, not 'minimal'. We will continue to listen to the industry, but it has to be realistic about the competing demands on public funds when it has already benefited so significantly."

Forum Response: The Bingo Association

A spokesman for the Bingo Association told ePolitix.com: "In announcing the introduction of a Gross Profit Tax (GPT) for bingo in the April 2002 Budget, the chancellor sought to create the right environment for bingo to maintain its role in communities and reach maximum growth; simplify the structure of bingo taxation and reduce compliance costs for bingo companies; ensuring a better deal for the player and making sure that tax reforms are 'affordable'.

"The GPT system proposed will not deliver these benefits. Clubs will be no better, and in some cases, will be worse off than before. The system will be more complicated to administer; and the most players will get is less than £1 per game.

"The chancellor's announcements on abolishing duty have created an expectation amongst bingo players of an immediate rise in prizes. This has caused our clubs considerable difficulty and our players great disappointment. We have had some success in explaining to players that change was not immediate or even imminent, but there is still the expectation that significant benefits, in the form of greatly improved prize money, will be generated by the new system.

"Whilst the GPT rate for bingo is 15 per cent, the effective tax rate for the industry as a consequence of additional taxes including VAT on participation fees is 30.7 per cent. A study by KPMG in 2000 found that bingo had a tax burden of 34.1 per cent compared to 19.9 per cent for arcades and 21.7 per cent for casinos.

"Betting and pools currently have a GPT rate of 15 per cent. Whilst the GPT proposed reduces the tax burden marginally, it increases it for smaller clubs, who would have benefited most from a system without VAT on participation fees.

"The industry made it clear to government during the consultation that there would be minimal benefit to clubs, and much less for players, in a system where VAT remained on participation fees. No other gaming product has VAT levied in the same way. Why are bingo players being discriminated against? [Treasury minister] John Healey stated in the consultation paper (August 2002) that reform will 'not only benefit bingo players and bingo companies but will also strengthen the increasingly important role played by bingo clubs within the wider community, and help ensure that the next twenty years are ones of growth and success'.

"The proposals announced on April 9 are a betrayal of bingo clubs and their players, and ignore the six months' of discussions which took place between the Association and Customs and Excise.

"They impose a timetable which is impossible to achieve, and which places a disproportionately severe burden on our smaller clubs. Until as recently as the end of February, Customs were working on a timescale for implementation of six months, broadly in line with what the industry had requested. Now the industry must implement the new - more complicated - regime in less than four months.

"The industry needs a system which looks to the future, not the past, and which gives it a chance to grow before it faces the full impact of measures put forward in 'A safe bet for success'.

"The chancellor's predicted 'benefits' for players are based on current, not future, returns to the Exchequer. This is in marked contrast to the policy adopted for betting - which received a first year boost of £145 million (a 50 per cent reduction in tax) - which was justified on the basis of future growth. Adding VAT exemption for participation fees to the current proposal would generate up to £482 million of benefits to bingo players by 2007."