Maltese government has announced its opposition to proposed EU tax measure for online gambling, making it difficult to implement the proposal from a timing standpoint. Concurrently, the European Gaming and Betting Association (EGBA) have also expressed concerns that this tax policy may inadvertently increase the amount of illegal gambling.
The original proposal was introduced by Member of the European Parliament Victor Negrescu, who has suggested implementing a revenue-based taxation structure for Online Gaming/Wagering Operators at the European Union level. Negrescu believes the revenue generated from the taxes collected by the EU tax on online gambling would be dedicated to funding educational programs, youth programs and initiatives designed to help those suffering from Compulsive Gambling Addiction.
According to Negrescu, the overall variation between the different tax structures for each of the Member States across the European Union creates an uneven playing field in which ESports Operators may choose to incorporate in low tax jurisdictions while being able to offer their services in multiple jurisdictions. According to a recent report by The iGaming, there is a vast difference in the tax rate charged to Online Gaming Operators based on the country in which the operator would like to operate — tax rates vary from the 5% tax associated with Malta Gaming to the 38% tax imposed on betting by the state of Austria.
In order for this kind of tax to be implemented at the European level, all member states would have to agree on it unanimously. Malta has already indicated its intention to oppose the tax, thus decreasing the chances of the tax being passed.
Malta’s position is based on its status as a leading center for the online gambling business; many of the world’s leading operators are located there, in part due to its beneficial tax conditions. The introduction of an additional tax at the European level would erode this competitive edge.
Cyprus and Estonia are also thought to be opposed to the proposal.
EGBA Raises Concerns Over Market Impact
The EGBA has raised concerns regarding the viability – both legally and in practice – of the tax proposal. EGBA states that regulation of gambling is primarily a national competence, thus creating limited legal basis for the imposition of an EU-wide tax.
EGBA has also warned that raising the tax burden on licensed operators would further distort the market, allowing illegal sites that do not pay taxes or comply with regulation to strengthen their competitive position, which, in turn, would reduce the channelization of the market.
EGBA cites examples in The Netherlands and Germany where an increase in gambling taxes has not resulted in increased revenue for the respective governments. Rather, both jurisdictions have seen a marked decrease in activity by legal operators and a notable increase in alternative illegal gambling opportunities.
