The Effects of Gambling Tax Changes Across Europe

Across European markets, both online and land-based gambling operators are facing uncertainty over changing tax laws. With different countries introducing varying tax rates and rules, gambling companies are left with an unpredictable future in the industry.

Many of these changes in tax regulations are having a negative impact on the profits of gambling companies. Online operators based outside of Britain will be forced to pay a 15% tax rate for UK based customers as of December 2014. The new ‘place of consumption’ (PoC) basis would tax operators dependent on the location of their customers as opposed to where they are registered.

This is set to have a drastic effect on certain operators based in offshore ‘tax havens’. Gibraltar currently levies gambling taxes at just 1%, with a cap of £425,000. The gaming market in Gibraltar contributes approximately one fifth of the territories’ GDP. However, with around 60% of the operators market being UK-based, the significant increase in tax rate, as a result of Britain’s PoC tax, would reduce profits and raise a significant risk to these online operators.

Despite this though, the new British tax laws do offer some economic benefits. Taxing offshore operators in line with domestic internet betting companies would not only help to level the playing field, but is also set to contribute £300 million a year in additional tax revenue. Sajid Javid, the Economic Secretary to the Treasury said: “These reforms will ensure that remote gambling operators who have UK customers make a fair contribution to the public finances.”

In other parts of Europe, it is land-based operators who are being affected by new tax regulations. In a surprising move, government officials in Bulgaria announced last month that they are planning to amend the 15% tax on turnover, which currently cuts into gambling operator’s profits. However, this may not come into effect for land-based businesses.

According to research on onlinecasinoking.com, the turnover tax, which was introduced for land-based gambling in Bulgaria back in 2010, contributed to a decline in operations. Gambling halls fell by around one third between 2008 and 2013, and game machines experienced a 50% drop. Industry officials are therefore urging the Bulgarian government to introduce the changes in online gambling wager taxes to all gambling operators in the country.

However, where certain parts of the land-based betting industry in Bulgaria have shrunk, the number of casinos has actually increased from 24 to 27. Angel Iribrozov, the Chairman of the Bulgarian Trade Association of Manufacturers in the Gaming Industry, believes this will attract foreign currency, stating: “Casino growth is a signal the industry is trying to provide high-end services to tourists.”

Other governments are introducing tax changes as a means to regulate their gambling industry. Earlier this year, the Dutch government sought a two-tier tax system, where land-based gambling would be taxed at a much higher rate than online operators. While online companies are taxed at 20%, land-based companies would see their tax increase from 29% to 75% according to the draft gambling legislation.

The proposal has been investigated by the European Commission, who stated that “the positive effects of the liberalisation of the sector outweighed potential distortions of competition”. The government also hopes that the changes will create a system of online gambling which is “responsible, reliable and controllable”, which would meet 75% of the country’s gaming demand and reduce at-risk players from 92,000 to 52,000.