Opinion: Italian gaming market averts disaster
Giulio Coraggio of DLA Piper Italy explains why a change in egaming tax rates would have been fatal for the Italian egaming market.
The last days of February will be remembered among the most stressful for Italian licensed operators. The decision of the Italian Government to collect additional 500 million from the gaming market in 2012 through an increase of the gaming taxes had scared both operators that had just gained their license and among a number of difficulties are about to launch their platform and well-established operators that after considerable investments in the last years have seen their potential profits at risk.
According to rumors, the increase in the taxation for the egaming sector was meant to prescribe a switch from a 20% gross profit taxation to a 1% turnover tax for casino and cash poker games. However, after a very strong lobbying activity perpetrated by gaming operators, the government decided not to implement such measures that were not included in the recently approved fiscal decree.
It is not excluded that discussions on the topic will restart in the future, but for the time being the risks seems to be avoided. The reasons of the decision from the government is not clear, but they might have understood that a taxation of 1% of the turnover (equal to around 38% of gross profits) for games with a payout of around 96% would have considerably damaged the market triggering to the lowering rather than an increase of tax entries.
Indeed the last data show that cash poker games and casino games are currently leading the market. A turnover of 1.386bn in January 2012 represents 80.6% of the turnover generated by the entire Italian online market that for all the other games has seen tremendous reduction of the turnover, with a 71.7% decline in sports betting revenues compared to January 2011).
In this respect, higher tax entries can derive from a development of the market rather than a higher taxation. This can be obtained for instance through the launch of online slots – currently prohibited – that represent more than 60% of the revenues for a number of casino operators and the implementation of more flexible regulations for both sportsbetting and bingo games removing limitations that are out-of-date in the current European gaming market.
The Italian gambling authority is currently working on such changes and we will see what is going to happen in the future. Indeed the Italian gaming market has demonstrated during the last years that it can considerably help the Italian economy to recover from the crisis, but an increase of the taxation (that is already high) seemed to be the erroneous move. The example of the French market that is already facing a crisis after just 3 years from its launch has been mentioned in several instances as a further confirmation of that.
Now that operators feel more relief we will see a number of operators that recently applied for an Italian remote gaming license to finally go live. And indeed it will be interesting to monitor the market to understand whether the market leaders will keep their current position or some new entrants will be able to attract Italian players. In any case the players will be the winners of this dispute as higher level of competition will allow them to enjoy a better product with higher percentage of winnings.
The government did not ruin the Italian market and hopefully operators will contribute to his success and to the recovery of the Italian economy.