The regulated online gambling sector in Spain lost more than €70m in its first 12 months, despite operators generating €234m in gross gaming revenues, according to a new Deloitte-authored report.
The study commissioned by local online lobby group Jdigital said that the €72.5m net loss across the sector from June 2012 to June 2013 was “mainly due to the high tax burden on the operators”. Nationally licensed operators pay gaming duty rising as high as 25% of gross revenue.
The figure however also included €125m spent on advertising, including media and sports sponsorships. As demonstrated in France, where losses halved to €85m last year as operators slashed the percentage of revenue they spent on advertising to 37% from 47%, ad spend is artificially high in the opening phase of dot.country regulation as operators battle for footholds in the market.
But Deloitte’s figures didn’t include the €150m foreign operators were forced to cough up in a retrospective tax grab by the Spanish government last year while they waited for licences to be issued, so operators’ losses resulting from dot.es regulation are substantially higher.
Presenting the report to the Confederation of Spanish Industry (CEOE) last week, Jdigital president and Betfair Iberia general manager Sacha Michaud said: “One of the main objectives of this document is to avoid situations similar to that taking place in France, where negative tax treatment has caused one of the most important markets in Europe to be significantly reduced, making it untenable for the majority of companies operating there.”
Jdigital also proposed several solutions to prevent the “flight” of operators seen in France, where there are now just 19 left standing some three years after opening. First, a reduction in Spain’s main igaming tax rate to 10% - in line with the regional rate in place in Madrid – further rebates or deductions in this to encourage job creation and tech investment, and “the promotion of partnerships structures to help reduce the negative impact of VAT.
According to Deloitte, if Spain had implemented a model similar to this from the opening of the market, this would have reduced the negative return to 10% of GGR from more than 30%, “and, moreover, would ensure proper tax revenue in the short to medium term.”
Marcos Río, senior associate at Deloitte, added that a direct consequence of reviewing the taxation of online gambling in line with their recommendation would, “under optimal conditions…be a source of wealth and jobs.”
Deloitte’s peer KPMG also recently advocated a 10% gross profit tax for the UK in a recent report it authored for London-based lobby group the Remote Gambling Association, arguing that anything higher would force operators out of business or into the grey market and customers to tax-avoiding offshore operators when all major participants are forced to pay UK duty from 2014.
Article written by Stephen Carter
