Operators baulk at Netherlands tax hike

A number of egaming operators have warned proposals to tax its soon-to-be-regulated sector at a higher rate than initially indicated could severely damage the market.

Those with an eye on the Dutch market were left shocked last week when the Netherlands’ ruling coalition revealed it had submitted proposals to tax online gaming at 29%, the same rate as land-based gambling in the country, as opposed to the initially proposed 20%.

While the tax rate could drop to 25% after three years if the online sector is considered large enough by that stage, it will be scant consolation for a number of operators who had eyed the Netherlands as a new growth market.

One chief executive at a mid-level operator told eGaming Review that the decision was “disappointing and misguided”.

He added that his hope now is that the proposal causes enough debate to delay regulation, on the grounds that it would be better if the Netherlands remained a grey market rather than be regulated at the newly proposed tax rate.

It also appears that the proposals have impacted the plans of at least some major operators exploring opportunities in the Netherlands.

A spokesperson at William Hill told eGR that the proposal “clearly makes it a less attractive market”, adding that while Hills has no immediate plans to enter the Netherlands it will keep it under review.

In 2014 William Hill called on Netherlands-facing affiliates to stop promoting its products in the country as the operator did “not want to jeopardise our (future) licence in the Netherlands”.

But should the market proceed with the 29% rate it will likely be only incumbent operators, including Betsson which acquired the Netherlands-facing casino brands Oranje and Kroon in 2014, and Unibet, which benefit.

Indeed, a senior source at another major international operator with no presence in the country said the new tax rate, combined with the need for expensive marketing to get a new brand off the ground, could make it rethink its strategy.

The source said additional levies would take the effective rate of tax towards the region of 31% or 32% and it would only take one more negative proposal – such as restrictions around sports betting products – to make it give up on the market.

And Unibet’s sports betting integrity office Eric Konings told eGR he didn’t believe the amendment was in the best interests of consumers, warning it could lead to an increase of users gambling offshore.

“Consumer protection is the key objective of the whole re-regulation process, and we’re afraid that this amendment pushes the consumer towards not locally regulated products,” he said.

Betsson Malta CEO Ulrik Bengtsson said that while the proposal was not positive news, it was too early to draw any firm conclusions.

“It is also important to note that the tax rate is only one part of the final legislation. Before we know how this will affect the market, we need to have the details for tax base, marketing rules, and the likely channeling effect,” he said.

Brian Wright, a director at the Remote Gambling Association, which counts most major operators among its members, said the 29% would be too high to give online operators “a realistic chance” of being competitive.

“The further the eventual online tax rate moves away from the originally proposed 20% the less likely it is to be workable and sustainable in the long run,” Wright said.