Swedish Finance Ministry Pushes for Increased iGaming Taxes

The budgetary process in the Scandinavian country Sweden is well underway. And in a curveball thrown from nowhere, the Swedish government is proposing an increase to iGaming taxes for the upcoming fiscal year. The Swedish Government (Regeringen) announced proposals to increase the country’s tax rate from the 18% it is at today to 22% of Gross Gaming Revenue (GGR). No doubt, this proposed increase is expected to have a tremendous effect on the revenue side of things.

It is nearly five years since the re-regulation of the Swedish online gambling market. Well, in case you didn’t know, until 2019, the country had a monopoly gambling market where only state-owned companies were permitted under the law to offer gambling services to the population for money. However, as time dragged on and with widespread digitization, Swedish citizens became privy to foreign gambling markets that they could use. As such, new legislation had to be introduced to boost the gambling market and establish new rules and regulations to govern the thriving industry.

The Government Backs Its Proposal

The Swedish government is backing its proposal, arguing that the initial 18% was put in place to avoid a possible negative outcome when the gambling industry re-regulation was conducted in 2019. Now, with the uptick in the channelization rate of customers toward the licensed gambling market today, the government feels that this warrants an increase in the tax rate.

Thus, as the government sees it, the new tax rate doesn’t present any threat of a negative impact on the gambling market today. The new proposal reads in part:

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“An increase from 18% to 22% is judged to be at a suitable level to strengthen the financing of government activities, without it leading to too great an impact on the companies and the size of the tax base. The excise tax on gambling should, therefore, be increased from 18% to 22%.”

According to the Swedish Finance Minister, Elisabeth Svantesson, the proposed tax increase of 22% will help the Scandinavian country achieve a channelization rate of at least 90%. The Finance Ministry also revealed that as Sweden was re-regulating its gambling industry, the initial proposal was for the tax rate to be placed upwards of the 20% mark. However, that was abandoned to facilitate the smooth handover to gaming operators.

A Boost on The Swedish Economy?

Should the tax proposal sail through, it is expected to take effect from 1st July 2024. According to the Swedish government, the move to raise the tax level will bring in additional annual revenue to the tune of an additional SEK 540 million, which translates to £39.3M/ €45.5M/ $48.4M. The extended statement from Regeringen opined:

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“The current tax rate of 18% has applied since the Swedish gambling market was re-regulated in 2019. The gambling market has since stabilized, and channelization has increased significantly. In addition, measures have been taken to exclude unlicensed gambling from the Swedish market, which came into effect on 1st July 2023. The reasons for caution when setting the tax level should, therefore, not be as strong as during the re-regulation. An increase from 18% to 22% is judged to be at a suitable level to strengthen the financing of government activities, without it leading to too great an impact on the companies and the size of the tax base.”

How Does Sweden’s Proposed Tax Rate Compare to Other European Powerhouses?

Just like the laws guiding gambling jurisdictions around Europe vary, the same applies to the iGaming tax rate across the continent. Greece has one of the highest GGR tax rates at 35%. In comparison, the United Kingdom, one of Europe’s biggest economies, has one of the lowest tax rates at 21%. Meanwhile, the Dutch have a tax rate of 29% (+ 1.5% to the gaming authority).

On the other hand, Italy, which commands Europe’s second-largest gambling market after the UK, has the same rate that the Swedish government proposes at 22%. So, compared to these countries, it may be argued that Sweden’s proposed tax increase is reasonable.

BOS Expresses Strong Reservations on The Proposed Tax Rate Increase

The Branschföreningen för Onlinespel (BOS), which translates to Swedish Trade Association for online gambling, has expressed dissatisfaction with government calls to increase the iGaming tax rates. Gustaf Hoffstedt, the Secretary General of the Association, said that the move was a disappointing one from the Swedish government.

He argued that the government failed to see that the online gaming industry is in a vulnerable position as things stand. Gustaf specifically stated:

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“The announcement from the government is deeply disappointing, above all because it shows that the government does not understand or has taken to heart what kind of market it is set to govern. Even less has the government understood the vulnerable position that the market is in.”

BOS’ head also referenced a recent study on channelization conducted by the group back in June. This study revealed that 77% of Sweden’s iGaming market is channelized, a rate that the BOS referred to as critically low. Moreover, the BOS found that some verticals, such as online gambling, have low channelization rates of up to 72%.

Thus, the BOS Secretary-General noted that the channelization rate remains a far cry from the nation’s 90% target. The group fears that should Sweden go with the government’s proposed tax increase, the channelization rate will continue to decrease to levels even below what was there in 2019 before the country’s 2019 re-regulation.