Double blow for OPAP with tax rise and monopoly challenge
Higher than expected levies see share price plunge - new legal opinion says OPAP's monopoly in Greece pursues an "expansionist commercial policy".
The share price of Greek operator OPAP fell by almost a fifth yesterday after the government confirmed plans to set a new 30% levy on gross earnings from all its games and a flat 10% rate on all player winnings from 1 January 2013.
Meanwhile, in a double blow for OPAP, an advocate general at the European Court of Justice has today released an opinion which states that the operator should not be allowed to continue its monopoly in Greece because it is using its protected position to expand.
The hike in taxes was agreed with the European Commission and represents at least a 50% hit on OPAP’s earnings, and come after a series of complaints from other operators that the Greek tax regime was biased towards OPAP’s monopoly and therefore contravened EU competitiveness laws.
Prior to yesterday’s announcement, which saw shares fall by 18% to EUR5.19, offline gaming revenue from the likes of sports betting, slots and lotteries was taxed under the standard corporate tax rate of around 21%. Other online gambling operators in the country were subject to a 30% levy on gross profits. Furthermore, a tax threshold on player winnings above EUR100 will also be abolished and will be taxed at 10% from the first euro from 1 January 2013.
The Greek government announced plans to sell of a 29% stake in OPAP earlier this, with bidding set to start imminently. The stake was estimated to be worth around $1bn with the sale part of the Greek government’s attempts to generate money from the privatisation of state assets, with the forlorn EU member state currently US$460bn in debt.
Stamatis Draziotis, an analyst at Eurobank, said while the new imposed tax rates will significantly affect the value of the operator, overall interest could be increased. “I think it’s more important that we have a clear tax regime now, so that any operator interested in bidding for the stake knows what the tax will be going forward. From a buyer’s point of view the changes should mean they won’t have to invest so much in the stake, as the value will be less,” he said.
Today’s opinion, included in a legal document written by advocate general Jan Mazak, challenges OPAP’s monopoly, claiming the operator pursues an “expansionist commercial policy”.
“Those circumstances … are in my view manifestly inconsistent with the purported objective of reducing the betting and gaming opportunities in Greece,” wrote Mazak.
“In my view … the activities of OPAP are neither subject to strict control by the public authorities nor effectively limited by the legislative framework applicable to it.”
The Greek government has faced calls from European operators to subject OPAP to a regimented tax regime, with William Hill, Stanley Bet and Sportingbet “ backed by the Remote Gaming Authority (RGA) “ all filing complaints to the European Commission.
Clive Hawkswood, chief executive of the RGA, said the advocate general’s opinion was “positive” and that it will be “very difficult for the courts to reach a different outcome [to today’s opinion]”. The case is expected to reach the European Court of Justice in the coming months.
The European Gaming and Betting Association (EGBA) meanwhile, welcomed Mazak’s opinion, with its director for regulatory affairs Maarten Haijer, commenting: “Greece must use this opportunity to regulate its online gambling market on a competitive and EU compliant basis, not just to provide customers a safe legal offer, but also to secure much needed tax revenues.”
“It´s quite ironic that the CJEU is now going to rule in this case; over four years after the Commission had expressed the same concerns in a Reasoned Opinion but failed to press ahead with legal action through the Court. We are encouraged by Commissioner Barnier´s statement to reactivate all gambling infringements against countries continuing to flout EU law but we need to see urgent action; we can´t wait any longer whilst operators’ legal rights continue to be compromised.”
OPAP exclusively operates and manages lottery and sports betting games in Greece, and last November saw the part-state-owned operator gain shareholder approval for a 10-year extension of its monopoly with the Greek government.
In its latest financial results for the first half of 2012, OPAP experienced a 6% drop in revenues compared to the same period last year.
Its move into the online gaming space, however, is well underway, with talks with chosen joint venture partner GTECH G2 said to be underway. OPAP announced plans to launch online gaming and to expand its services into a number of regulated earlier this year.