Channelling and taxation in European online gambling markets: evolution and policy implications Full Text

(24)This was especially true at a time where gambling halls and gambling machines did not exist. While it is up to the Member State to explain in detail why the measures are compatible with the internal market, the German authorities did not further support their claims and did not explain on which legal basis the measures could be regarded as compatible. SHSWSN also did not provide any precise explanation as to why the measures would be necessary, appropriate and proportionate.

Enhanced restrictions govern bonus offers, limiting operator flexibility in customer acquisition. Stricter customer due diligence requirements under updated AML legislation demand extensive documentation. The German government’s insistence on taxing every euro wagered has created a parallel economy where most slot players avoid licensed sites entirely.

The complainants consider that the Commission did not clarify certain aspects of the VAT offsetting mechanism. For the complainants, the Commission failed to examine their argument that the obligation to pay VAT had no economic consequence for the public casinos. It is also still unclear whether public casinos use the right to deduct input VAT even though this is not necessary since, even if they did not use that right, they would save the amount of input tax through a reduction of the casino tax.

Rhineland-Palatinate submits that, even though the tax exemption was only and specifically granted to the Spielbank in Bad Neuenahr, this was the only public casinos operator before 1958 in that city and thus there was no need to lay down a general exemption. Rhineland-Palatinate also considers that the exemption from communal taxes did not expire because it was regularly renewed. The German federal authorities argue that there is no effect on trade because the effects of the measures are purely local and do not have more than marginal effects on cross-border investments or cross-border establishment. Because of the geographic location of most of the public casinos, it is also unlikely that clients from other Member States would travel to the German public casinos only to play there.

• Table A1 in the Appendix provides fuller details on individual countries’ taxation choices.
• It also looks at how the design of taxes can affect different economic agents and their behaviour.
• On 1 January 2024, the GGR tax rate jumped from 23% to 30% for most gambling products.
• The report’s indicator-based analysis assesses recent trends in EU tax systems and identifies how tax policy, implementation or compliance could be improved.

The changes also affected the substance of the schemes themselves and the alteration is thus not severable. As highlighted by the German courts (173), the very high (around 80 %) rate of the casino tax existing before such changes was deemed appropriate to cream off the profits of the public casinos operators, in line with the objective of the special tax rules. Therefore, a reduction of that rate, without any link or reference to the normal tax rules, has the potential to change the very nature and objective (and thus the substance) of the special tax schemes by turning a likely disadvantage (very high tax rate leading to a higher tax burden than under the normal rules) into an advantage. A change in the tax burden under the special tax rules – in the absence of any safeguard that the taxation will not be lower than under the normal tax rules – also endangers the ‘replacement’ and ‘skimming’ logic of the special tax treatment and thus the objectives assigned to it. The case-law of German courts also shows that the special taxes paid by public casinos operators replaces the normal taxes, including the entertainment tax (125), which would not make sense if public casinos (and their games) would not fall under the scope of that tax in the first place. In the same vein, the entertainment tax laws of the cities often explicitly exempt public casinos from entertainment tax, which also shows that the games offered by public casinos are regarded as falling, in principle, within the scope and under the objective of the entertainment tax.

They are also subject to normal tax rules (such as VAT) for their gambling activities, except for the aspects examined in this Decision. In any event, in France Telecom, the Court did not make its assessment dependent on the fact that the beneficiary was, except for the measure at stake, subject to the normal tax rules. To assess the existence of an advantage, the financial situation of the undertaking following the measure should be compared with its financial situation if the measure had not been taken (84). According to the case-law of the Court of Justice, the concept of aid embraces not only positive benefits, but also measures which in various forms mitigate the charges which are normally included in the budget of an undertaking (85).

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Contrary to ministry projections of an extra €200 million, gross gaming revenue fell by 25% and tax receipts dropped to only 83% of the prior year’s level within the first six months. Increasing tax rates, coupled with tighter advertising controls and player deposit limits, has driven channelisation down, with estimates showing that only 50% of gambling occurs on licensed platforms. Applicants face minimum fixed annual contributions of €1.5 million, yet the tender system emphasizes revenue share and fixed fees over operational or technical plans. As a result, established incumbents have a significant advantage while innovation is stifled. The sector’s growth—helped by tourism and the certainty of long-term licenses—has not allayed concerns about the sustainability of these high barriers, especially as Portugal’s 30 licensed online operators generated €284.7 million revenue in Q alone with €95.5 million in taxes paid during the quarter. Reduced channelisation undermines player protection measures, data collection for problem gambling identification, and broader regulatory oversight that licensed markets provide.

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The UK Gambling Commission must license all online casinos that target players in the UK. It enforces some of the toughest player protection standards in Europe, and all UKGC-licensed sites must follow the rules of fairness, anti-money laundering, and advertising. What’s more, UKGC casinos must not accept credit card deposits, and they should encourage players to set deposit and loss limits. The European online gambling scene is the largest in the world, regulated by strict regulatory bodies like those in Malta or Sweden, and growing year after year. (145)They were also exempted from VAT, wealth tax and the capital duty and from the lottery tax (the latter being a tax of the Länder), these exemptions being not relevant anymore.

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We have been publishing the ART, previously titled ‘Tax policies in the European Union’, since 2016. Through the ART, we aim to describe in a clear and accessible manner the current trends and the main indicators used by the Commission to assess progress on tax policies in EU Member States and at EU level. Many of these indicators on taxation trends are produced in-house based on ESTAT data and with the crucial contribution https://ineoswillfall.com of EU Member States. In addition, the ART informs stakeholders of recent tax reforms and tax-related developments, both at national level and at EU level, as well as the performance of EU tax administrations. The ART can also include a focus on selected aspects that we consider particularly relevant within the tax policy context, also depending on DG TAXUD’s and the Commission’s priorities. (112)  In some Länder, the operators are designated directly in the law (see for instance Article 2(2) of the law of Bavaria on public casinos).

This has to be done by demonstrating that the measure derogates from that common regime inasmuch as it differentiates between economic operators that, in the light of the objective pursued by that regime, are in a comparable factual and legal situation. Third, if such derogation exists, it is necessary to examine whether it results from the nature or general scheme of the taxation system of which it forms part and could hence be justified by the nature or logic of the system. In this context, it is for the Member State to show that the differentiated tax treatment derives directly from the basic or guiding principles of that system. When the Commission assesses aid schemes, it does not need to check that the criterion of effect on trade is actually met in all individual cases, for all beneficiaries of the scheme and whatever the amounts of aid at stake. Thus, a selective advantage to public casinos is liable to affect intra-Union trade by making it more difficult for companies from other Member States to enter the market and operate gambling halls in Germany. The gambling machines operated by public casinos are also fundamentally different from the ones operated by commercial gambling halls.

Interestingly, while the share of labour taxation has remained the same over the years, the share of environmental and property taxation has declined. This evolution does not seem in line with the call to shift some of the tax burden to sources that impact less on employment and production. We can see that tax rates have declined significantly in the last decades in support of firms. EU Member States also provide a variety of tax support and faster depreciation schemes, for example to increase R&D and more recently green investment. At the same time, this is done in a fragmented way, resulting in companies facing relevant costs to comply with so many different tax systems.

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While the tax rates of corporate tax/personal income tax and of the solidarity surcharge are laid down uniformly at national level, the municipalities can set (within certain limits) the rate of the trade tax. The normal tax rules may thus vary depending on the location of the operator (the trade tax rate depends on the location of the operator) and its legal form (corporate tax and personal income tax are alternatively applied depending on an entity’s legal form(94)). The tax exemptions, the (very limited) reductions of the casino tax and the VAT offsetting mechanism (and, more generally, some necessary flexibility in the setting of the tax rate in order to ensure that public casinos can carry out their public tasks) derive from the 1933 and 1938 laws. There were no significant modifications after 1958 or those changes would only be the concretization of possibilities existing before 1958. The existence of a public casino before 1958 is not relevant for the exemption from corporate tax and income tax.

Operators of regular gambling machines such as commercial gambling halls may be in competition with public casinos operators to the extent they all offer games of chance but this is not sufficient for State aid purposes. The interchangeability of the products by reason of the products’ characteristics, their prices and their intended use is decisive. The ECA submits that a tax advantage would merely constitute compensation from the State for the services of general economic interest provided by the German public casinos. The casinos have been entrusted by the Länder with the public task of curbing illegal gambling and providing state-monitored opportunities to satisfy the irrepressible human need to gamble. Public casinos operators are subject to various regulatory restrictions (legal form, need to have a licence, blacklist of addicted players) while commercial gambling halls operator can choose their legal form.

Other trusted authorities include the German authority (GCL), Danish authority (Spillemyndigheden), and Spanish authority (DGOJ). All of these authorities enforce strict rules on fair gaming, player protection, and complete financial transparency. Every site licensed by trusted regulators like the MGA, UGKC, Spelinspektionen, or similar can be considered safe. Players often choose their casino based on the availability in their region and the Europe casino bonus real money they can get, like a Europe casino no deposit bonus or a sign up bonus. According to research conducted by Ericsson, over 90% of Western Europeans use smartphones. So, it’s no surprise that mobile gambling is growing fast in Europe, and most top casino sites are now fully optimised for mobile.

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It also provides support to ensure a high level of protection for consumers and vulnerable people, including minors. In the area of standardisation, we requested the European Committee for Standardisation to develop a European voluntary standard on reporting in support of the supervision of online gambling services by national regulatory authorities. What sets top EU casinos online apart is their strong regulation, wide game variety, and multiple payment options.

In Baden-Württemberg, the special tax rules (tax exemptions and special taxes) that existed before the entry into force of the TFEU were laid down only individually in ministerial decisions for one identified operator which ceased operating public casinos before the beginning of the recovery period (165). In addition, the special tax treatment for the casino in Konstanz was limited in time and expired in 1960 (166), before the beginning of the recovery period. As a consequence, the tax treatment of the public casinos operator(s) in Baden-Württemberg during the recovery period is a new measure and arises at the earliest from the 1995 law mentioned in Table 2. SBN submits that comparing the special tax rules and the normal tax rules is not the correct method to establish the existence of an advantage in this case because the two tax systems are very different, as the Commission itself acknowledged in its abstract comparison. A concrete comparison is also not the correct method because there are no normal market conditions for public casinos operators (case C-15/14, paragraph 77-79).