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Bundestag Okays 5.3% Online Gambling Turnover Tax in Germany
By Jeff Osienya Jun 27, 2021 LegalityGermany’s parliament ratifies the controversial 5.3% turnover tax on wagers placed on online slots and online poker. Industry bodies filed complaints to the European Commission, but there’s a bleak chance of redemption from the tax.The national parliament of Germany, the Bundestag, has rubberstamped a contentious bill under the State Treaty on Gambling (GlüNeuRStv) after it received approval from state-level lawmakers back in March. According to the new bill, a 5.3% online gambling turnover tax will be applied on all stakes for Online Slots and online poker games across licensed and unlicensed operators serving German players.
On top of the turnover/rollover tax for online slots and online poker wagers, another measure under GlüNeuRStv also introduces a new €1 ($1.19) stake limit per spin on online slots. The newly ratified directives will officially take effect on Thursday, July 1st, 2021, following their backing by representatives of all Germany’s 16 federal states earlier last week.
As expected, lawmakers from the four parties making up the current coalition government – the Green Party, the Christian Democratic Union (CDU), the Social Democratic Party (SPD), and the Christian Social Union (CSU) voted in favor of the controversial tax in Germany’s national parliament. On the flip side, lawmakers from the Alternative für Deutschland (AfD) and the Free Democratic Party (FDP) voted against the rollover tax measure, whereas the Die Linke abstained from participating in the vote.
Germany’s State Treaty on Gambling Will Potentially Crush iGaming Revenue
Germany’s new rollover tax law has come under fire since lawmakers first greenlighted it in March. Online gambling operators serving the German market have called out the law alleging that it was introduced to give land-based operators in the country an unfair edge over their online counterparts.
Moreover, internet-based operators protested that the tax rate is so high that it might surpass the actual revenue that operators would generate from online slots and online poker. But how is this possible? Well, the rollover tax fundamentally places a new definition to revenue and profits from online slots and online poker.
This turnover tax will impose a duty fee on the operator for every wager in a round of play of an online slot machine, and each online poker hand dealt to players, whether there’s a win or a loss for players involved. By doing this, the taxation ignores all the principles of the gameplay of online slots and online poker. As a result, this form of tax may inflate the profits and losses that are made by online operators when it is being calculated.
By contrast, most of Europe’s regulated gambling jurisdictions and elsewhere worldwide use Gross Gaming Revenue (GGR) as a baseline for taxable revenue and profit. An average tax rate of 20% to 30% is imposed on the total GGR, which is generally considered a fair assessment.
Online gambling operators aside, players also disagreed with the new turnover tax when it was first announced, at least according to an April survey by Goldmedia. Sponsored by GreenTube, Flutter Entertainment, and Entain, the research findings indicated that 49% of online gamblers would seek alternative options in the unregulated market. The migration to offshore operators would be because the hefty tax would negatively affect the RTP of games in licensed online operators.
The Turnover Tax Still Faces A Legal Hurdle
Before coming into effect, the new measures under Germany's GlüNeuRStv have to be submitted to the European Commission for final approval. Mind you, in May, after the endorsement of the new gambling regulations by state-level lawmakers, the European Gaming and Betting Association (EGBA) and Der Deutsche Sportwettenverband (DVSW) each filed complaints with the European Union against the turnover tax. The EGBA is Europe’s trade body for online casinos and sportsbooks licensed in the EU, whereas DVSW is Germany’s gambling industry trade body.
Taking Germany’s Bavaria state as an example, EGBA argued that “online poker and slots stakes being taxed at rates 4-5 times higher than their equivalent in land-based casinos and rates 15 times higher than slots offered in land-based amusement arcades.” In the complaint, the EGBA also pointed out that land-based casinos in Germany would end up having an annual tax advantage worth up to €290 million compared to online operators. Furthermore, given that taxes levied are a portion of the total gaming revenue, Germany will supposedly violate EU annual state aid rules to the tune of at least €741 million annually.
After Germany’s national parliament approved the 5.3% turnover tax last week, the DSWV president Mathias Dahms voiced his dissatisfaction saying:
Quote“By taxing the individual stakes, the state asks the customer to pay for every single spin of the virtual slots – over and over again, every few seconds and even if the stakes come from previous winnings. There is a reason that all other EU countries have imposed an income tax on these games and not a gaming stake tax. When it comes to online gambling, Germany is turning the wrong way in tax policy in Europe. For years, the countries had struggled to find a compromise on the State Treaty on Gambling and to open up the online gambling markets in order to finally get this area under regulatory control. Now the countries are destroying their own work with an over-tax regime for virtual machine games and online poker in the last meters. ”
Amid all the uproar, it’s vital to note that since the year 2000, the European Commission (EC) has taken very little action when responding to complaints related to regulations and taxation introduced in its member states. So, while the European Commission did announce a probe into the turnover tax at the beginning of June, there’s a high probability that the regulation will stick. After all, Germany followed through with ratifying the rollover tax law till the end despite the EU’s ongoing probe.
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