GPT way forward for regulating countries
Governments should focus on introducing regulation that breeds a highly competitive market, offering consumers what they want within a well regulated and tax-generating environment, says Tim Phillips of Betfair.
Several European governments are currently reviewing their egaming laws. Central to the debate is how to tax online operators. Taxation is a crucial, and often contentious, issue. In general, governments are choosing between two different models: gross profits tax (GPT ), sometimes called gross revenue tax, and turnover tax.
Turnover tax is a tax on every bet placed. In contrast, GPT is a tax on stakes less winnings for traditional bookmakers, or the commission charged to customers in the case of betting exchanges.
The offline gambling industry has historically been taxed using a turnover structure. As a result, and because of its perceived simplicity, governments generally consider turnover tax as the default model for the online sector.This position is one Betfair, and other operators, argue against on the grounds that turnover tax decreases a government’s tax-take from gambling and also has negative repercussions for consumers.
While the adoption of a GPT model enables licensed operators to offer customers highly competitive and innovative products, implementation of a turnover tax achieves the opposite, making it commercially unviable for operators to offer products which are low margin.
In essence, this means that those operating in a turnover tax environment are incapable of providing their customers the best prices and value. Being unable to do this is a critical flaw in any market that exists in today’s borderless online world, where customers are value driven, and if not satisfied with what they’re offered in one jurisdiction, will go elsewhere to find it.
This reality sees governments losing out in terms of tax revenues and control of who their citizens are gambling with, with many such operators not conforming to the codes of customer security and integrity that governments want imposed.
Restricted markets caused by prohibitive tax regimes or financial blocking measures, as seen in Norway, have been proven not to prevent consumers accessing both the sites and the better value that they want to get to. In fact, in a recent survey, only 35% of Norwegian online gamblers said that the blocking measures had made it more difficult for them to bet as they did before.
In France, the adoption of a turnover tax, plus the cap on returns to players, has subsequently led to the inability of operators to offer low-margin products. As a result, only 36 companies have taken a licence there, despite the fact that, according to the French Ministry of Finance, there are thousands of online gambling websites accessible. At a recent Senate Committee meeting, Jean-Francois Vilotte, the President of French regulator AR JEL , admitted the licensed French sports betting market is performing well below expectations and that there needs to be a rethink on the fiscal model used.Some governments across Europe are looking at GPT to form at least part of their gambling tax model.
Denmark will tax all online products on a gross profits basis while Greece also looks set to follow suit. Spain and Ireland have indicated their intention to tax betting exchanges under GPT and the Italian licensing framework provides for GPT for casino and cash poker.
The same tax model will also apply to betting exchanges as and when they are brought within the licensing framework.Consumers, operators, and governments will all benefit most in a highly competitive regulated gambling market, the existence of which is the only way regulation of the online gambling sector can be successful. Governments need to realise that adopting a GPT model for the online industry is the best bet for everyone concerned.