A controversial tax proposal in Germany is going to take a bite out of online gaming earnings in the country. A bill that is currently being considered by Bundestag’s Finance, Legal Affairs, and Consumer Protection and Sports Committees set a 5.3 percent turnover tax for those particular industries.
This bill is part of the country’s new State Treaty on Gambling. If approved, the tax proposal will be implemented by July 1 and will cover all 16 federal states of Germany.
The proposal is a highly controversial one. There are many stakeholders in the gambling industry that say that the proposed tax rate is prohibitively high. According to the experts, the tax would result in a disadvantage for local operators.
They would be paying the proposed tax while offshore operators won’t. This is in addition to all the other restrictions that German operators have to face like caps on stakes, deposits, and spin speeds.
The criticism is not only coming from the gaming industry. The original turnover tax rate for slots was 8 percent. Leading economist Dr. Justus Haucap and the Düsseldorf Institute for Competition Economics (DICE) published a report that the high tax rate would make regulated gaming completely unprofitable. According to the report, the government should be seeking a tax rate based on gross revenue like the rest of Europe and set it between 15 to 20 percent.
Another report, this time from Goldmedia, has come out that that the steep 5.3 percent tax rate would push half of the German slot players to unregulated sites.
Criticism also came from the European Gaming and Betting Association (EGBA) and it was even more pointed. They say that taxing online operators differently from their land-based counterparts violates European laws.
Attempts To Lower It
The high tax rate has also been under fire from gaming operators. When the state treaty was first being debated in the German state of Sachsen, the Deutscher Sportwettenverband (DSWV), the gambling operator association in Germany, asked that the state legislature should not approve the treaty unless lower taxes were in place. According to them, a one percent turnover tax would be the best choice. However, they were also willing to accept 15 to 20 percent gross revenue tax.
The German online gambling scene is facing some tough times as it is suffering from a transitional system before the approval of the new regulations. According to online operator Bet-at-home, it lost 5.5 percent revenue while LeoVegas stated that they lost 55.7 percent.