Betfair ordered to comply with Italy's Covid-19 recovery tax despite successful appeal

Betfair has lost its appeal to stop the implementation of a 0.5% temporary sports betting tax on exchange bets after a court in Lazio ruled in favour of Italian gaming regulator Agenzia delle Dogane e dei Monopoli (ADM).

The 0.5% recovery tax, or Salvasport tax, was introduced in May 2020 as part of the Decreto Rilancio, or Revival Decree, and applies to all online and retail bets, as well as bets on virtual sports.

This tax regulation states: “Collection of bets relating to sporting events of all kinds, including in virtual format, carried out in any way and on any means, both online and through traditional channels.”

The tax is limited in how much can be levied by the Italian government each year. In 2020, a maximum of €40m was levied, while in 2021 there is an upper limit of €50m (£43.3m) in place.

Betfair argued its exchange model did not actually collect bets from bettors but instead allowed bettors to bet against each other before charging commission on the transaction.

As such, the Flutter Entertainment subsidiary claimed the 0.5% tax had been applied to Betfair illegally.

In addition, the firm argued that enforcing the tax on winning exchange bettors would make exchange betting less attractive, resulting in the funnelling of players back into fixed-odds betting, where they would be taxed anyway.

Betfair also claimed the tax was contrary to EU law by imposing a trade barrier on the free movement of goods and services.

However, judges in the TAR court in Lazio dismissed Betfair’s appeal that it did not act as a collection agent for bettors.

“From a systematic examination of both the concession agreement and the sector legislation, it is clear that the betting exchange represents both technically and legally a collection of bets, as without the intermediation activity, and in the absence of the platform managed by them, the players could not interact with each other and, ultimately, could not make any collection of bets,” judges in the court ruled.

“Therefore, even if it is a collection activity carried out in a manner clearly different from those used for traditional bets, there is no doubt that there is a collection activity of bets by the concessionaires operating in the betting exchange and that such collection, like all the others, must be considered in the will of the legislator subject to the levy subject of this judgment, albeit with possible distinctions,” judges added.

The court ruled Betfair could not be exempted from the 0.5% recovery tax as it would undermine the entire legislation.

“The broad wording of the provision does not allow any form of collection of sports bets carried out by public concessionaires to be removed from the withdrawal,” judges said.

“The betting exchange represents one of the methods allowed by the concession for the remote collection of games and bets and, therefore, subtracting from the withdrawal introduced only the collection of bets “with direct interaction between players” would constitute an unjustified difference in treatment with respect to the collection as well as its purpose,” the court added.

However, the court did criticise ADM for failing to differentiate between fixed odds betting and exchange betting and ordered the regulator to re-examine its motivations for implementing the tax and investigate its calculation method.

Betfair won part of its appeal after judges also required ADM to review the calculation of the tax for the exchange, as the current application of the tax is considered unfair, has not been motivated nor justified and Betfair has provided alternatives that could have been implemented achieving the same public interest but without excessively harming the exchange operators.