Written On 4/5/11 By Emily Apontif :
Consultancy makes recommendations after studying three European markets
The respected online gambling consultancy H2 Gambling Capital has concluded a survey of three separate European regulatory regimes in a bid to assess a level of taxation that will attract operators but at the same time deliver reasonable taxation value to the nations concerned.
The company studied the markets in Italy, France and the United Kingdom, coming to the conclusion that taxation on gross profit at over 15 percent is unlikely to render the best results in terms of bringing in operators or satisfactory tax income.
"The percentage of a nation's remote gambling demand that is catered for a by a dot.country scheme is maximised with a lower rate of gross win tax applied to all product verticals," H2 reports.
"Under a 5 percent gross win tax, after five years 95 percent of a country's market is likely to be captured by the dot.country scheme, whereas at 20 percent, this would fall to approximately 60 percent."
H2 also examined the relationship between gross profit tax and taxation rewards, noting that each percentile increase in tax rate on average delivered only a 0.5 percent rise in the tax harvested, resulting in a situation where the higher the tax rate, the lower the return for the taxman.
This phenomenon reaches a tipping point at the 15 percent level, where the tax income declines as operators either opt out of regulation or decide not to enter the market in question.
French tax officials will presumably be particularly interested in the results of H2's professional assessment; the high French levels of taxation have been roundly criticised, with several major online gambling groups electing to stay out of the French liberalised market, and a review of the liberalisation process due later this year.
The example of the United Kingdom, where major groups like Ladbrokes, William Hill and Betfair have taken or are taking their internet divisions elsewhere, joining many Brit companies in jurisdictions like Gibraltar, should present an object lesson on the impact of too-high taxes on the fortunes of companies in a fiercely competitive industry.
Spain and Greece are in the throes of introducing regulatory and tax regimes, producing several false starts in terms of inflated tax proposals in recent months, whilst Denmark has set its sights on a 20 percent of gross profits rate for its contentious regulation of online gambling scheduled for implementation in late 2011.
With regulatory regimes developing in Europe on a nation-by-nation basis, and promising possibilities shaping up in the United States, the H2 survey constitutes a timely and useful contribution to the international debate.