Italy reacts to online gambling tax hike
Online casino and sports betting in the country hit with January tax rise
Italy-facing operators are preparing for an uncertain start to 2019 following news the Italian government has raised tax rates on online gambling as of 1 January.
Existing gross gaming revenue-based tax rates of 20% on online casino and bingo will now increase to 25%, while the current 22% tax rate on fixed-odds sports betting will also rise to 24%. Taxation of virtual sports will also increase from the current 20% of GGR to 22%.
The tax rise will also affect their land-based counterparts, who will be subject to a 20% GGR tax on sports betting, rising from the previous 18%.
The measures were included as part of the Italian government’s revised 2019 budget proposals, which were approved following a compromise agreement with the European Commission agreed late in December. The Commission had vetoed prior Italian government budget measures on economic grounds.
This, coupled with the implementation of the so-called ‘dignity decree’ which will come into effect in June 2019, effectively banning all advertising of gambling, save for those Italian lottery ads drafted by regulator AAMS, means that the Italian market is becoming a hostile one for operators.
Moreno Morasco, president of Italian trade association LOGiCO, believes that these unexpected last-minute tax hikes have taken the industry completely by surprise. Morasco lays the blame for the late implementation on the unexpectedly high cost of implementing the so-called “universal income” for citizens, a pre-election manifesto promise.
He believes the Italian government could have addressed the issue less detrimentally by “increasing the levy on machine gambling (where half of revenues of the whole legal industry lie) by 2 percentage points on average, but they instead went for the wrong route, contradicting the virtuous path not only pursued by their predecessors, but also by their international counterparts.”
Giulio Coraggio, partner at law firm DLA Piper believes the tax increases are a contradiction in terms because “the government wants Italians to play less through these measures, but at the same time wants them to play more since it needs tax entries from the gambling sector”.
However, Coraggio believes that there may be one unexpected benefit for operators, in that the Italian government may look to adopt a more flexible approach to the imminent advertising ban to avoid any potential reduction in tax revenues from the gambling sector to preserve its new budget status quo.