With VAT raising from 17.5 percent to 20 percent yesterday we will all be feeling a price increase in a lot of things that we spend our money each month. While the direct effects on bingo are likely to be limited as most operations within bingo are now exempt from VAT (e.g. profits on bingo are charged bingo tax rather than VAT) the knock on effects of job cuts and customers having less money left each month are likely to have effects on both land based bingo clubs and online bingo.

Things like petrol will rise by 3p and a pint of beer 6p. Reports suggest a lot of people will be putting off buying expensive items such as TVs and cars in the near future due to the increases. Retailers are faced with difficult decisions especially on goods that are strategically priced to attract buyers (e.g. 99p and £9.99). Retailers will be reluctant to increase the price for fear of lower sales which will mean they will have to cut costs elsewhere. Other suppliers will have to cut costs due to the reduction in sales. A number of bodies campaigning against the VAT rise claim it will result in significant job cuts and obviously people will have less money to spend as a result of the VAT rise. It is very likely therefore that consumers will spend less on things like bingo.

Unless bingo operators that charge admission and sell food and drink products increase their prices they are likely to lose out. In addition bingo clubs that heavily promote their clubs with the use of promotional goods are likely to feel the effects. One of the problems associated with bingo operators in the UK paying bingo tax rather than VAT on their gambling profits is the difficulty in claiming back VAT on goods purchased.

For a traditional retailer they pay VAT on goods purchased and charge VAT on goods sold. They are then able to reclaim all the VAT paid on the goods purchased. The problem for bingo clubs is that they will pay VAT on goods purchased but as they only charge VAT on part of the operations they run (e.g. admissions charges, bar and café products sold), in many cases they haven’t charged enough VAT to be able to reclaim all of the VAT on the goods they have purchased.

The effects on online bingo operators are likely to be very small; however they will have to take account that customers will have less money to spend. Job cuts and financial concerns amongst players are expected to lead to an increase in problem gambling in 2011 and operators need to ensure that they are acting in a responsible way to combat this. As a result of the nature of online bingo it does pose bigger risks than land based bingo sites. An emphasise on short-term profits by operators at the expense of increased problems will not only tarnish the image of the industry but also lead to further legislation.

As we have reported over the last few years there are a number of operators and portals that mislead players in terms of advertising bonus deposits and withdrawal terms and conditions and it is clear that such policies are concerns. Some of the bigger names in the industry such as Tombola and Foxy Bingo have much better practices and not only do not try and mislead players or have ridiculous conditions but they also have policies in terms of restrictions on play to prevent problem gambling.

Justine Greening, The Economic Secretary to the Treasury in the Coalition Government commented: "We keep all taxes under review. We are keen to have a dialogue with the industry. I look forward to talking to the industry over the coming months."

"I know that that argument has been made by the industry, and I am aware of its campaign on fair taxation. We want fair taxation. One of the Government's key priorities is tackling the budget deficit, and ultimately the best way for us to support not just bingo clubs, but other companies in Britain employing staff is to get the economy back on its feet, creating jobs so that people have money in their pocket to spend, including in bingo clubs."

As bingo clubs pay more tax than other forms of gambling, and online bingo sites based offshore pay no tax, it is expected that at some point in the future that the tax regime for all forms of gambling will be reviewed.