The German government is aiming to have a 5% turnover tax for online sports betting in place ahead of the new Interstate Treaty on Gambling coming into force on 1 July.
Fifteen of the German Federal State parliaments intend during the next two weeks to ratify a new Interstate Gambling Treaty proposing the issue of no more than 20 licences for private sports betting operators based on an unworkable 5% turnover tax, ahead of this coming into force across all 15 Lander on 1 July.
While a committee debate on the accompanying draft bill implementing a 5% tax on all the value of sports bets was last week suspended by the German Bundestag until later this month, the main coalition partner, the CDU, has emphasised the legislative process must be finished by the end of this month.
Henrik Armah from the Berlin office of lawyers Olswang however said in a note that serious doubts over the legislation raised by experts in a finance committee hearing in March had not gone away: “The different taxation of lotteries and sports betting could be considered to violate the constitutional principle of equality. Furthermore, experts believe that the extension of tax liability to foreign gambling providers could result in a critical double taxation of these providers.”
Lotteries currently pay 20% tax on the value of each ticket. Further, added Christoph Enaux of Olswang, 96% of tax revenues from betting on horse racing are also distributed to horse racing associations under the old Taxation Act dating back to 1922, which will be flagged up as a form of State Aid incompatible with EU law when the new sports betting amendment is notified, as required, to the European Commission.
A host of local and pan-European online gambling operators have applied for licences in the northernmost Land of Schleswig-Holstein (SH), that refused to back the new Interstate Treaty and instead passed its own Gambling Law providing for the issue of unlimited licences for all products based on a 20% gross profit tax. Since the licensing process began on 3 May, seven operators, including Betfair, bet365 and bwin, have received sports betting licences, with at least further 24 applications for sports and 17 for casino games (including poker) in the licensing pipeline.
The new SH coalition government consisting of the SPD, Green Party and the SSW Danish minority parties that officially took power last Tuesday 12 June, however declared its intent in its manifesto to join the new Interstate Treaty backed by the other 15 states. It added that it would look into whether it would be possible to repeal the SH Gambling Act without becoming liable to pay damages to existing licence holders and if it could be amended to stop the issue of further licences under the regime without breaching competition law.
New SH prime minister, Torsten Albig, despite previously lending his public support to betting and gambling providers establishing businesses and paying taxes in the region while he was mayor of SH capital Kiel, however reiterated his government’s intent to join the Interstate Treaty at a prime ministers’ conference last week.