There was an eccentric discussion in the House of Lords regarding the taxation of financial spread betting on financial markets. Spread betting is when an investor speculates on the financial markets, and places their bet upon the future price of several financial assets such as a bond or stock. Moreover, it is also utilised in sports betting and it’s not such a surprise that the U.K. government doesn’t place taxes on this type of transaction, the answer being that the attempt to do such would lead to negative tax revenues which is negating the entire point of taxation.
Not paying tax especially on something the government has purposely decided to charge tax isn’t necessarily regarded as tax avoidance. The reason being that the decision not to tax is relatively quite simple; there wouldn’t be any tax revenue consequently there being revenue loss.
The entire point about all types including spread betting is that all winnings of people must be purely offset by the losses of another. There are companies in the mid-range who are tasked to organise things and they are taxed on their profit based on their accustomed manner.
Moreover, it is also becoming a standard part of the U.K. system of taxation that if there is going to be tax levied on the income of something, hence there will also be equal allowance against losses on doing exactly the similar thing.
Hence, if there be an introduction on betting winnings, there will also be a need of a system of credits as well as allowances for managing losses in betting. Betting is considered a less than zero sum game and the winnings of any trader are obviously the losses of others respectively.
The taxed that is supposed to be charged should be equal to the tax credits gained, which ultimately means that the total winnings are equitable to less than the supposed total losses. The credits as well as the allowances for losses would be a little bit higher than any revenue gained from sustainable gainers. For this very reason, taxes on winnings are barred mainly because this would lead to revenue losses and not gains.