European Gaming & Betting Association (EGBA) has submitted a formal complaint to the European Commission to protest a recent proposal by German lawmakers to level an additional tax on online slots and poker as Germany prepares for the reorganization of its digital gambling market on July 1.
According to EGBA, which represents Europe’s leading online gambling operators, the proposal will “provide a substantial and unfair tax advantage” to the country’s land-based gaming sector and will breach EU directives.
The Bundesrat, the legislative body representing the 16 German states, has recently sent a proposal for the introduction of a 5.3% tax on online poker and slot stakes. The proposed levy is subject to final approval from the nation’s legislature, the Bundestag, and is currently being reviewed by three different committees.
It is believed that lawmakers will give the green light to the proposal ahead of the enforcement of Germany’s Fourth State Treaty on Gambling, the country’s permanent online gambling regulatory framework that will authorize the provision of online sports betting, casino, and poker services by locally licensed international operators.
Under this recent proposal, online slots and poker games would be taxed at an additional 5.3% on their turnover. In its complaint to the EC, EGBA noted that these services would thus be taxed at a rate 4 to 5 times higher than what land-based gambling establishments in the country pay in taxes.
Proposed Tax Constitutes Illegal State Aid
In its complaint, EGBA said that the proposed tax on online slots and poker would “result in a substantial and unfair tax advantage” to Germany’s land-based sector.
The association provided an example with Bavaria where the implementation of the proposed tax measure would result in online casino and poker operators paying taxes 4-5 times higher than their equivalent land-based casinos and rates 15 times higher than what land-based amusement arcades pay for offering slot machines. EGBA estimates this would result in an annual tax advantage of €290 million for Bavarian brick-and-mortar establishments.
Nationwide, the association estimates the measure would result in an annual tax advantage of nearly €750 million for the land-based sector. According to EGBA, the proposed tax on turnover constitutes an illegal state aid under European law.
Under EU law, member states are not allowed to offer an advantage to “specific companies or industry sectors, or to companies located in specific region” through tax rates and other interventions.
EGBA Secretary General Maarten Haijer said that while they appreciate the efforts of Germany’s lawmakers to introduce a new online gambling framework, and recognize the need for an appropriate tax to be implemented, they think the proposed turnover tax on online slots and poker is “punitively high and will distort market competition and directly benefit Germany’s land-based gambling establishments over their online counterparts.”
In a similar move, Germany’s gambling industry trade body, Deutscher Sportwettenverband (DSWV), has filed a state aid complaint against the proposed tax rate with the EC, arguing that its potential implementation would hurt the online sector, while benefiting its land-based counterpart.
At present, online gambling operators provide their services in Germany under a transitional framework that took effect last fall and will remain effective until July 1, when the permanent law is set to be enforced.
Source: EGBA Submits EU State Aid Complaint Over German Online Poker Tax, EGBA Newsroom, June 1, 2021