What are the odds your online betting could take a hit?
Those pesky Germans. If they aren’t beating us in football, beating us to the sunloungers or just being, well German, they have to start fiddling with our vices.
All but one of Germany’s states have now proposed new laws to tax sports betting from next year at 16.67% of turnover. This news this has hit London listed online betting groups bwin.party digital entertainment Plc (formed last week from the merger of PartyGaming and the Austrian b.win) and Betfair Plc, hard, as both companies shares have taken a beating on the stock market. Who’d have bet on that happening?
Currently both companies actually operate from Gibraltar. It may be because of the good weather and continental atmosphere but is more likely to be because this means they can avoid paying UK tax on gross profits.
Germany does not currently regulate online betting, but these new plans to levy a tax on turnover would include the total amount of money staked with a bookmaker, including a customer's winnings. So a gambler with £10 to spend who wins £100, who then (mistakenly?) places another bet using winnings still only spent £10, but the bookmaker would be taxed on £110. You can see why they are not keen.
bwin.party has said that it doesn't believe the German proposals are in compliance with European Union law nor are they in line with market requirements, claiming it wouldn't be possible to provide a competitive product if it is charged over 16% tax on turnover. Shore Capital estimates that Germany accounts for around 23% of bwin.party's revenue.
For Betfair, a turnover tax would be unsustainable given the high-volume, low-margin gaming products on which its exchange model is based. If this were to become law, Betfair may have to redesign its model across the board. The new German proposals also ban in-match betting, the fastest growing area of online gambling, and limit online casino games to those companies that operate land-based casinos, shutting out the purely online gaming companies.
So why do you care? Well if you only have an annual flutter on the Grand National (tomorrow), you probably don’t, but if you do like to dabble with the horses- no, in a betting on them kind of way- you could see odds slashed in an attempt to recoup some of the tax loss they will be suffering.
Clearly companies with a smaller proportion of German wagerers will be least affected, but if the rules are passed, this could then leave the floodgates open for other European countries to change their own rules to follow suit. Which would not be A Good Thing.
Currently b.win are challenging the proposals on the basis that they are contrary to European law and have already stated they will apply for a licence in the one State that has not subscribed to the new plans (Shleswig-Holstein). However, similar proposals in Spain and Greece were amended to become a gross profits tax after lobbying, so there may be hope yet