Who Pays More – Gambling Taxes Across Europe

Posted by Harry Kane on Wednesday, April 17, 2019

While the UK may have one of the most progressive and well-regulated gambling markets in the world, it’s also facing an increasingly heavy tax burden. This has much to do with the government’s desire to generate tax from operators have decided to relocate their headquarters a popular gambling hub such as Malta or Gibraltar.

This has seen operators hit with a so-called ‘point of consumption tax’, which is commonly referred to as the Remote Gaming Duty (RGD) and payable on all bets made by UK customers regardless of where the operator is located. This will increase by 6% to a hefty 21% in October, as the government looks to recoup some of the tax revenue lost through the impending FOBT cap.

This must be paid in addition to the base rate of corporation tax, which is currently fixed at 19% and will rise to 20% in April 2020. This tax burden has left operators concerned about the long-term growth and competitiveness of the UK market, but how exactly do we stack up against our European rivals?

1. Spain

In many ways, the decision to increase the tax payable by UK operators has bucked the trend in the European market, with several nations looking to create more favourable conditions for iGaming brands.

The reason for this simple; as many of these nations are at an earlier stage in their growth cycle and are committed to lowering taxation as a way of driving growth, optimising profits and attracting operators from other jurisdictions.

No single country embodies this approach better than Spain, who has recently unveiled a raft of tax breaks and incentives for both domestic operators and those that are currently based overseas.

Most importantly, the Spanish government has unveiled a 5% cut in the gross gaming revenue payable by operators, with the rate having being slashed from 25% to just 20%. This was a strategic move to capitalise on the recent growth in the online marketplace, which saw a 27% increase in gambling revenue during the first quarter of 2018.

Not only this, but the central authority in Spain has also incentivised semi-autonomous cities such as Ceuta to provide more substantial tax breaks for operators who relocate there in the near-term.

These include a 10% levy on net profit (compared to 20% from any other jurisdiction), and a relatively low corporation tax rate of just 12.5%. Not only this, but the enclave of Ceuta does not require businesses to pay VAT, and altogether these factors combine to create a truly compelling proposition for iGaming brands from throughout Europe.

To this end, a total of seven iGaming operators have relocated their online divisions to Ceuta, including British bookmaker Betfred, Spanish company Suertia and Italian outlet Mondobet. This trend is likely to continue indefinitely in the near-term, particularly amongst British brands who wish to reduce their operational costs and retain single market access in the future.

2. The Netherlands

The iGaming market in the Netherlands is one of the most intriguing in the world, not least because it was once monopolised the government and exclusively reserved for domestic operators.

This was an unusual phenomenon in Europe, where intercountry trading remains a staple of the region’s sustained economic growth. As a result, the Dutch authorities have relented and now opened the door for foreign companies to start trading in their country.

While this has provided a shot in the arm to the iGaming market in Holland and established it as a more competitive entity, however, the tax burden of operators remains noticeably high in comparison with the UK.

All operators must pay a hefty 29% on their gross gaming yield, for example, while they’re also required to fund a 1.5% contribution to the gaming authority and a 0.25% input into the national addiction fund. This has led some to include that the nation’s government still have a huge influence on the iGaming market, with tax money being used to fund public initiatives the safeguards for problem gamblers.

Another interesting facet of the Netherlands marketplace is that the authorities tax players rather than operators. This method provides an alternative to the controversial point of consumption tax, but it’s something that continues to be frowned upon by most European market.

With this in mind, it should come as no surprise that Dutch players are often required to declare their winnings to the taxman, although this depends on the size of your wins and your overall returns.

3. Italy

While the UK is largely considered to be the biggest player in Europe’s iGaming market, it’s Italy that continues to deliver the most significant yields and returns.

This has been the case since 2012 when Italy issued a total of 200 AAMS licences and introduced a series of proactive initiatives aimed at driving exponential growth within the market.

One of these saw the introduction of a fixed-odds betting tax of 22% on an operator’s GGY, which is relatively competitive and also offers a degree of transparency to casino brands and sports betting websites alike.

However, Italy has since introduced a range of more stringent tax regulation since the beginning of 2019, starting with a 25% levy on gross gaming revenue derived from virtual casino gameplay and online bingo. This represented a hike of 5% from the previous year and has been met with dismay from many of Italy’s market leaders.

The aforementioned fixed-odds betting tax has also risen from 2% and 24%, while virtual sports wagering has seen a similar increase and is now fixed at 22%.

Overall, these tax hikes have made the Italian market far less competitive in comparison with recent years, with both the UK and Spain offering far better prospects for ambitious iGaming brands.

4. The Czech Republic

Next, we come to one of Europe’s growth gambling markets, with the Czech Republic has recently welcomed brands like PartyPoker into its fold.

Not only is this one of Europe’s fledgeling markets, however, but it’s also one of the more unusual in terms of its structure and the way in which tax is levied.

More specifically, operators have to pay different amounts depending on the type of iGaming platform that they run. So, while sports betting operators will need to pay a 23% tax on their revenues, those who run slot machines will be required by law to repay 35% of their earnings.

The Czech Republic also has some unique rules pertaining to those who gamble, with individuals who have previously filed for bankruptcy (or are currently in receipt of government assistance) explicitly prohibited from wagering online.

This is an interesting anomaly and one that highlights how burgeoning markets are carving their own unique tax legislation in order to optimise growth and regulate themselves in the best possible way.

As we can see, UK operators are currently facing a number of challenges, from Brexit and a rising tax burden to the impact of increasingly stringent regulatory measures. However, brands in the UK typically pay less in tax than they do in other European nations, which will incentivise customers to remain located on these shores.