Tax Proposal Will Prohibit Spanish Internet Gambling Industry from Growing

The Spanish Government has been encouraged by the Remote Gambling Association (RGA) to alter its planned tax system from one rooted in turnover into one derived from gross profits. Although the RGA welcomes new Spanish gambling laws for internet wagering, they believe that a tax regime based in turnover would prevent the Spanish online gambling market from becoming viable.

Chief Executive of RGA Clive Hawkswood spotlighted the risk of Spain’s projected economic path by declaring ‘Unfortunately, we have seen the effect of a turnover tax on the ability of remote gambling operators to run economically viable businesses in France, and a major reason for that is the turnover based tax regime. We advised the French authorities that their fiscal framework was not workable, but this warning was not heeded with the result that few operators have taken up licenses, which has stifled competition, value and choice for consumers. It would be a great shame if Spain implemented the same regressive tax policy. ’ (Although the European Commission is finally happy with French gambling laws, only three months ago online gambling execs were vexed by French laws.)

KPMG of Madrid created a study for RGA which analyzed the gambling market, turnover’s force, and gross profit tax regimes in correspondence with the plan to license and control internet betting in Spain. The report demonstrates vividly that “as well as providing for greater investment and competition between operators, improving innovation, choice and value for consumers, a gross profits tax would serve to optimize the size of the Spanish market with the positive effect that this will have on tax revenues collected by the State.”

Hawkswood supplemented the report by asserting he “hoped that the Spanish authorities would give very careful consideration to the detailed response provided by the RGA and its members to the Government’s consultation on the draft legislation. A failure to address this key tax issue will unfortunately serve to make the draft law’s positive regulatory proposals ineffective because operators will not seek to enter or invest in a market where they cannot be profitable. A suitable gross profits tax model would enable the Spanish Government to attract large, reputable companies into Spain and that would provide a market for the industry, excellent products and value for the consumers, and revenue for the state and regions. It would be hugely disappointing for all stakeholders if a modern and forward thinking regulatory regime was fatally undermined by an unworkable tax regime”

Taxing gambling turnover instead of gross profits creates an especially large problem for online casinos in Spain. While internet casinos may collect grand fortunes from their players, large portions are returned to the players through bonuses and promotions. Moreover, though these casinos certainly maintain a house edge to remain profitable, a competitive online casino must return most of the deposit to the consumer; for example, All Jackpots Casino has a 96.45% payout according to the November 2010 eCOGRA Safe & Fair Review.