Frg: Tax Debate About Online Casinos

Tax would apply on every spin

Just a few days after Berlin initiated the ratification of the new German gambling law, the finance ministries of the federal states presented an initial tax model for online slot machines and online poker. The former should be taxed at 8 percent on stakes, the latter at 5.3 percent. The tax for slot machines would therefore apply to every spin (8 cents per euro).

According to statements from the Süddeutsche Zeitung (SZ) and NDR, nothing is yet known about the taxation of table games (roulette, blackjack, etc.), which have been widely discussed and are still illegal to date. What is clear is that the current tax draft was presented by a working group consisting of the finance ministries of North Rhine-Westphalia, Hesse, Bavaria and Berlin.

The Federal Ministry of Finance is responsible for taxing the booming market, for which a number of transitional rules have been in effect since October 15th. This has always been entrusted with all changes to the Racing Betting and Lottery Act, which has existed since 1922 and contains the tax rules for lotteries, horse racing and sports betting. Now the taxes on online gambling should also be included.

With the ratification of the German gambling amendment in Brussels and the recent vote by the country heads, the German gambling reform has entered the decisive phase. Until the so-called State Treaty on the New Regulation of Gambling (GlüNeuRStV) comes into force, the amendment must now be approved by at least 13 of the 16 state parliaments by April 30th. For this purpose, the state treaty must be converted into valid state law, with the taxation of the sector playing a key role.

Ministries expect billions in revenue

The Federal Republic of India's finance ministries are currently expecting that the proposed tax model will generate additional revenue of around 1.365 billion euros. This value is based on the sales generated by the sector in 2018. The value is greatest because the new model charges taxes on stakes and no sales tax on earnings. The model is justified by the fight against problematic playing styles.

Player protection is a firmly anchored parameter in the new gambling law. According to the ministries, in order to implement this, the industry must be supported by taxes. A tax of 8 percent is suitable for creating appropriate competitive conditions and at the same time curbing illegal gambling.

The regulation of German online gambling is accompanied by strict player protection requirements. For example, there is a betting limit of 1,000 euros per month, plus a ban on live betting and a ban on table games such as roulette and blackjack. In the case of the latter, the federal states should be able to decide for themselves whether they remain illegal or are handed over to the state lotteries. In addition, blocking registers, self-exclusion and early warning systems must be installed to limit gambling-related harm.

Industry criticizes tax model

Since the operators of reputable online casinos usually pay out over 90 percent of the stakes, the new model is being massively criticized. The German Online Casino Association (DOCV) sees this as jeopardizing channeling into the legal market, as the offer wopossible is no longer attractive enough. Even the state lotteries, which are currently working on online casino games themselves, have joined in the criticism.

Since the taxes are too high, customers will continue to be forced into illegality, according to DOCV President Dirk Quermann. This would fail to achieve the goals of the law. In order to create a successful legal market, a tax must be levied on gross gaming revenue, as is common in other countries, for example Great Britain. The countries should do this, according to them media reports, but have excluded.

Is the new gambling law hybrid?

The DOCV also sharply criticized the ban on table games, which may be given to lotteries. This also puts customer channeling at risk. It is a hybrid legislation as players would expect both slot machines and table games to be offered through the same portal. The DSWV (German Sports Betting Association) also got involved and criticized the lack of detailed clarification.

With regard to the new central regulatory authority that will take over supervision of the sector after legalization, many details are also unclear, including the question of financing. In addition, it is not yet known whether the authority will be newly built or whether a building will be rented. It seems as if another discussion and regulation marathon is looming between now and July. It remains to be seen whether the market will open on time.

FRG: Tax debate about online casinos