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Taxes: Online Gambling vs. Land-based CasinosBy GP News Team Mar 15, 2020We explore the taxation levels in leading gambling regions around the world, paying special attention to the levies applied against land-based vs online operations.
Online gambling is a lucrative and growing industry worldwide. While many countries have banned gambling in one form or another in their regions, there are key countries that have been far more liberal about gambling activities inside their borders. Many of these regulated jurisdictions are controlled from within Europe, including the United Kingdom and the European Union.
Progressive thinking governments have seen the advantages of allowing controlled gambling, which quite simply put – contributes to their revenues each year. Of course, this means that casinos and betting businesses are therefore being taxed. But, have you ever stopped for a few seconds to wonder how this taxation is conducted?
Players seem to be far more concerned about whether they need to pay taxes, that many of us don’t give a second thought as to how the government benefits from the operators themselves.
Land-Based vs Online Betting Levies
A few decades ago, when talking about casinos, it was taken for granted that we were talking about physical betting premises with physical game cabinets, tables, roulette wheels and more. We cannot be as assuming today, as online gambling has reached fever pitch, affording its own segment in the gambling industry.
It goes without saying that the costs involved in running a brick and mortar casino versus running an online operation vary greatly. For starters, the overheads in a physical premises ought to be much higher, not to mention the salary cheques paid every month to the massive staff compliments.
So there is a distinct difference in the business makeup in each of these sectors, but are these various platforms seen in a different light by the governing authorities and therefore taxed differently? – This is the question we hope to answer.
We will take a look at some of the prime gambling districts in Europe to draw our conclusions, namely the United Kingdom (under the regulation of the UK Gambling Commission) and most of the European Union (most of which gambles under the banner of the Malta Gaming Authority) and Sweden (which is a new regulated jurisdiction under the Spel Inspektionen).
A Kingdom of Difference in the UK
The United Kingdom is commonly accepted to be the most tightly regulated market in the world. The legislation in place is far more bias towards the player’s interests than the casino’s needs, yet still commands a lot of ‘dough’ from the operators to boost their coffers.
In the online sector, the general taxation on remote gambling operations lawfully catering to UK citizens under license rose from 15% to 21% of the Gross Gaming Revenue (GGR) in October of 2019. This constituted a steep climb in taxes, and together with further tougher laws coming into place with regards to betting limits and credit card payment restrictions, online casinos are sure to feel the pinch.
The pinch is not as painful as that experienced by land-based operators, who face taxes of up to 50% GGP. The tax system for land-based operators is on a tiered system, so some casinos and betting facilities could pay as little as 15% of their income, while those gaming giants yielding in excess of £5 million in revenues will be subject to the maximum tariffs. All the while, players in the UK needn’t worry about coughing up for the tax man, as all gambling wins are exempt in this regard.
GGR: Gross Gaming Revenue is calculated by subtracting wins paid out to players from the total revenues paid from players to the casino.
Machine Mayhem in Malta
The Malta Gaming Authority is one of the fairest and most well-balanced gaming regulators around often said to be the benchmark for gambling regulatory bodies around the world. While the taxation seems far more lenient than those set out by the United Kingdom, there is once again a marked trend in extra costs for land-based operators.
While all gambling establishments must foot the €25,000 per annum licensing costs, additional taxation of 5% on the GGR is required year on year. While this already sounds favourable, the costs do not stop here.
All land-based operations must pay separate levies on each gaming device offered on their gambling floors. This could see the casino or betting facilitator paying around 30% of the GGR on those devices, depending on the type of game being offered. But it doesn’t stop here.
Both land-based and online operators must also pay a Compliance Contribution based on the types of games that they offer to the public. The maximum tax level incurred here is around 4% with a set cap for each type of game offered. Traditional casino gambling is split into:
- Type 1 Games: These are casino games of chance controlled by RNGs. The tax cap is €375,000.
- Type 2 Games: These are casino games similar to those in Type 1 gaming, but where the game outcomes are not determined by RNGs. The Tax Cap is €600,000.
- Type 3 Games: These are facilitated games, where the operator promotes and abets the gaming, but where players play against other players and not the house (Like World Series Poker). The tax cap is €500,000.
From the above information, it is discerned that land-based gambling operations are run at a greater cost than online vendors.
Did you know: The RTP on slot games run at land-based casinos are lower than those offered by online games? This is because the overheads and taxation costs are generally higher and a higher profit is therefore needed to make ends meet.
The Swedish Switchover
For a long time Sweden operated gambling via state run casinos, who offered both land-based and online casino entertainment to its citizens. Though they were always allowed to issue licenses to other parties, they never did. The country has since relaxed its hard stance on solely government owned casinos, and now issues licenses freely (without compromise of quality of regulation) to remote casinos who want to operate within the borders of the country. Whether an independent casino is land-based or online, they are taxed in exactly the same way (though licensing costs will differ), at a fixed rate of 18% of GGP. All social and public gaming remains tax exempt.
This rate falls a little below the UK, which is why many UK Licensed casinos are now turning their attention to the budding Swedish market to grow their platforms.
Tax Highs and Lows
Though we have concentrated efforts on three of the most well-known regulated jurisdictions in Europe, there are many more countries incurring either much higher or much lower taxation levels. For instance, the most expensive country to run a casino from would be Germany. Here the taxation rate is as high as 90% in some provinces, which is shockingly high. It puts a new light on the term ‘sin taxes’.
Then there is Gibraltar. This region runs a tight ship when it comes to gambling regulation, to such a degree that the UK Gambling Commission will allow Gibraltar-licensed casinos to trade within their borders, but of course, they must cough up the remote gambling tax of 21% for doing so.
Normal taxes levied by the Gibraltar government are very low, having just recently dropped from 1% of GGP to a meagre 0.15%, constituting as a casino ‘heaven’ for operators.
Russia, however, is surprisingly the most accommodating country in the world when it comes to gambling operators, as the tax rate on casinos is 0%. Here, players pay more on their winnings declared than the casinos do (an amount of 13%).
Despite the already pressing expenses incurred at brick and mortar casinos, it seems that regulators believe that they have the most to gain from these establishments, as they load the levies for land casinos.
Online casinos are treated more mildly and are left with a great opportunity to earn rewards with minimal expense, especially if they are licensed in the right area.
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