William Hill has withdrawn its online sportsbook from Germany, following the country’s introduction of a new tax and regulatory regime for sports betting.
Germany’s new Interstate Gambling Treaty, replacing the state monopoly on online sports betting with the issue of up to 20 licences to private operators, came into force on 1 July, alongside a 5% turnover tax on sports bets and a continued ban on online poker and casino.
The UK’s largest bookmaker will however continue to make its online casino and poker available to German players, for the time being at least.
The bookmaker, whose online business is licensed in Gibraltar, also shut down its Australian-facing operations earlier this year after Nevada regulators questioned ahead of the company’s licence hearing whether the company was operating in breach of the Interactive Gaming Act 2001, which bans the offer of online poker and casino in Australia.
Europe’s leading operators have had to review their German-facing operations in the wake of the Interstate Gambling Treaty, backed by all but one of the country’s 16 federal states.
bwin.party, that had planned to offer sports betting, poker and casino across Germany off its licence in the breakaway state of Schleswig-Holstein (SH) and pay 20% on gross profit, “or continue operating in Germany as is”, recently announced to investors that it would be paying the higher Rennwettlotteriegesetz (RWLG) turnover tax on all of its sports bets in Germany. This would result in an earnings hit of “approximately €5-10m in the current year” from its single largest market, accounting for 22% of the bwin and PartyPoker owner’s 2011 revenue.
Irish operator Paddy Power, that generated a far smaller share of its revenues from the territory, decided to block access to its dot.com site from Germany following the new Treaty entering into force on 1 July.
Betfair, despite also relying on Germany for a far smaller share of its revenues than bwin.party – around 4% of revenues and £5m of EBITDA contribution – declared its intention during its recent FY analyst earnings call to not pay the federal Rennwettlotteriegesetz, despite a failure to do being a criminal offence and exposing the company’s employees to the risk of arrest. It has also become a “premium partner” of German Bundesliga football team Bayer 04 Leverkusen next season, in a move set to test the country’s contradictory new gambling laws.
The company’s CFO Stephen Morana, speaking in his capacity as acting CEO ahead of Breon Corcoran’s arrival from Paddy Power in August, said: “In the last couple of days, you have seen a 5% turnover tax on sportsbooks is to be introduced at the federal level. A 5% turnover tax would of course make the market unviable for the exchange.
“However, expert legal advice suggests there are serious fundamental questions of applicability, interpretation and constitutional law. Hence we intend to continue operations with the exchange, and as previously outlined, we intend to pay a 20% gross profits tax to Schleswig-Holstein on our exchange revenues.”
Betfair did not however provide any explanation of how it will actually pay this tax to the SH authorities if the latter is not legally able to actually levy and collect it.