Controversial New Tax in Germany Being Contested

Another new tax is under review in the newly forming German market.

The Controversial Tax

The latest is an approval by German legislators to levy a 5.3% iGaming turnover tax.

The controversial tax was overwhelmingly approved within the regulatory list of gambling laws embedded with the recently-ratified New State Treaty on Gambling.

Application

Igamingbusiness.com reports that the new tax will apply to revenue of iGaming operators offering video slots and online poker, with the 5.3% figure originally generated by the nation’s Bundesrat body and subsequently approved by Chancellor Angela Merkel's coalition government via floor vote Wednesday.

Legislative Approval

The approval of the coalition government does not guarantee the inclusion of the tax provision. With Germany's liberalised market set to go live on the first of next month, opposition is in the water from industry bodies Deutscher Sportwettenverband (DSWV) and European Gaming and Betting Association (EGBA), who are seeking to get the rate lowered via compliant proceedings with the European Commission.

Trade Body Opposition

The two trade bodies jointly voice the concern that the 5.3% duty is overly “punitive” in practice favoring the land-based gaming over iGaming, resulting in a local channelization rate that the research of prominent iGaming operators Entain, Greentube and Flutter Entertainment indicates will not surpass 51%.

EU Tenets

The grounds for the claim stem from the rule of the European Union prohibiting member states from providing unfair tax advantages through regulation that would favor “specific companies or industry sectors” or “companies located in specific regions.”

Early Results

In the earlier phase of transitional testing, iGamingBusiness.com indicated that prominent iGaming participant operators LeoVegas AB and Bet-At-Home.com AG expressed concern over certain requirements of the incoming tenets New State Treaty on Gambling already hurting their first-quarter revenues.

Disparity Explained

Data does indicate that state-by-state disparities between total revenues collected by land-based versus online gaming sectors per capita could result in that tax taking a more significant bite out of lesser earning iGaming sectors, but the iGaming sectors should catch up with the land-based sectors in time.

Outlook

Regulation models were made to be adapted—and the sheen of Germany opening its market after years of delays is no less bright and all stakeholders are eminently capable of resolving the differences in a professional manner.