Italy’s turnover tax killing the country’s licensed sports betting operators

italy-sports-betting-taxItaly’s licensed sports betting operators are withering under the market’s oppressive tax regime, according to speakers at a recent seminar in Rome organized by gambling law practitioners DLA Piper. To illustrate this point, the licensed betting operators in attendance were told that Italy’s online sports betting spend slipped from €168m in 2009 to just €135m in 2013, while the UK’s more mature market somehow managed to increase sector spending from €489m to €776m over the same period.

The chief suspect in Italy’s sports betting decline is the stipulated tax on betting turnover, which is currently set between 2% and 5% depending on the number of possible outcomes of an individual wager. The University of Milan’s Marco Pilanzi demonstrated the worse case scenario of this tax regime via Italian regulator AAMS’ own figures from September 2012, when the net return to Italy’s licensed sports betting operators was –€1m, yet these operators were still required to ante up a collective €2.7m in taxes to the state for the month.

The sports betting tax is all the more onerous given that Italy has declared that both exchange betting and virtual sports betting operators will face a 20% tax on gross gaming revenue (GGR) when companies like Betfair get the official nod to open for business next year. This has traditional fixed-odds betting operators wondering whether their already struggling businesses are about to take a further hit as punters explore these other options to obtain more bang for their betting buck (or euro).

DLA Piper’s Giulio Coraggio has proposed a one-year test period in which fixed-odds operators would enjoy the same 20% GGR rate as these other firms. Given the paltry size of the online sports betting market compared to Italy’s land-based VLT and amusement with prizes (AWP) gaming machine operations, Coraggio believes the switch wouldn’t put a serious dent in government tax revenue. It might even improve tax revenue because it would allow sports betting operators to offer a product more competitive with that of international operators not holding an Italian license, thereby expanding the pool of Italian punters willing to bet within the law.