- June 21, 2016
- Posted by: TSBA
- Category: International Regulation
The following is a speech that was presented by Sue Rossiter, British Expert and former Director for Creation of Projects, Rules and Procedures with the largest European Association of Operators and Online Games of Chance. Members of this organization include multinational companies such as William Hill, Ladbrokes and Bet365.
Online gambling expands a national market into an international market, and possibly further with additional tax revenues.
The remote gambling sector is highly competitive and a consumers are very sensitive to price differences.
Consumers will very easily switch from operator to operator, and at times even operators in different jurisdictions.
As a result, Tax regimes for online gaming may need to be different to measures that have been applied to land-based gaming. So why would I bet with a particular online gambling operator? First of all, quality of online experience. Secondly, the prices offered by the operator. Thirdly, the advertising and marketing that attracted me as the customer to the operator. Finally, bonuses, free bets and all other offers that encouraged the customer to gamble with that operator.
Taxing online gambling affects 3 out of 4 of those different factors. Influences such as internet and smartphone penetration
And Tax regimes to resoult for online gambling may need to be different to measures applied to the land-based gambling .
So, why would like bet with a particular online gambling operators. First of all, Quality of online experience, secondly the prices the operator of his main, thirdly the Advertising and marketing the attracted me to customers to the operator and finaly bonuses, free bets and all offers , that made to a customers to encourage them to gambling with that operator.
Taxing online gambling affects 3 of the 4 those differents things. Influencing internet and smarthphone user what mean increase the wedge beetwen the different tax structures in gambling operation.
Excessive tax rates push customers and providers offshore and will mean that the tax base in any jurisdiction is eroded. Tax has to be considered holistically and must be administratively efficient.
So, if we have additional tax, what will happen?
One thing remains, improvement in the quality of online experience due to start-up costs and routine operating costs for the operator.
On the other hand, for three of the four factors, things get worse. For consumers, prices get worse especially when taxes and withholding taxes affect the customer. Secondly, we mentioned advertising is reduced as operators are forced to cut budgets and focus on particular jurisdiction. What is really important however, is that not only is the customer and the operator affected, but also industries that are supported by such activities: marketers, advertising professionals and television complements.
And Thirdly, bonuses and free play which are used to create customer loyalty will be stopped and if operators are still offering such things from overseas, consumers will follow such bonuses and play overseas.
Offshore gambling frustrates revenue in the jurisdiction and also creates social regulation and objectives that must be met by operators.
Before the internet, there was no opportunity for gamblers to play overseas and avoid paying taxes so they were forced to gamble in their jurisdiction. But when people do get a chance to get a better deal elsewhere, they will do so. People cannot refuse to purchase certain products locally, but gambling is totally different to any other product. Especially when customers experience winnings tax which are completely against their interests. Sincerely when organization is presented an opportunity to both earn and increase profit they will do so. So gamblers will switch to offshore operators which in turn reduces the tax base, and gamblers switching offshore means some of your gambling activity is unregulated.
Getting the tax rate and tax structure right minimizes these risks.
Competitive effects are not just restricted to gambling taxes, so to make the licensed regime viable, Governments must take into account all compliance costs which include:
Taxes on Consumers
Business taxes etc, and all of these needs to be taken into account.
The key position to consider in Montenegro today is the Winnings Tax that makes it very expensive for licensed operators. Below is an example of what this means when you put in this tax, and the implications thereafter: The customer appears to have much worse odds, much worse prices and they think they are being cheated by licensed operators even when they’re not.
What has happened elsewhere?
Elsewhere across Europe, we have said the most successful regimes charge no more than 15% gross gaming revenue (GGR). Economic analysis in Italy that was done by KPMG showed that an introduction of 15% tax on GGR would result in up to €1 billion being repatriated back on shore. Basically, by having tax on GGR, we pull back a billion in taxes to the Italian Government.
In France, 7.5 percent turnover tax and tax receipts are down year on year. Operators are forced to leave France every year.
Bulgaria suggested a transaction tax on all payments into and out of online accounts. They withdrew this once they realised it was counterproductive. What happened was that people started to avoid using Bulgarian banks in all of the payments they were making.
Denmark introduced a 20% GPT and has seen increasing Tax revenue as the market grows and more operators are receiving licenses year on year.
Spain introduced a 25% GPT and 52% of all online betting is offshore with operators withdrawing from the market.
This is just members of the RGA. As you can see, we represent some of the largest operators across Europe. We have a lot of experience in this and have worked in many jurisdictions. We want to work with Montenegrin authorities, and will be happy to assist with any information we are able to provide.