Bwin.party rocked by German betting tax proposals

Gaming-industry analysts said that it could be impossible to run a profitable business with duties set so high, as sports betting operations tend to generate gross margins of between 10% and 15%. Attempting to increase margins would probably make odds unattractive to gamblers, experts believe.

Bwin.party generates around 23% of its € 827million (US$ 1181 million) revenues from Germany. Betfair, the publicly listed betting exchange, generates less than 5% of revenues from the country and saw its shares slip by 3.69%.

The current betting regime in Germany, which is accused of being protective of state lotteries, was called into question last year when the European Union said it contravened EU law. The European Court of Justice said the rules were not "consistent and systemic enough" to claim that they safeguarded gamblers from addiction, as opposed to merely protecting government revenues.

A spokesman for Bwin.party said: "There is still a long way to go. We remain confident that in the end the government will comply with European law and implement a commercially viable licensing regime to the benefit of all stakeholders and not only lottery operators."

Other betting-industry executives also insisted that the market had overreacted, as Spain had also proposed a regime where the turnover of betting companies be taxed, only to back down later. Currently, companies such as Bwin.party take unregulated bets from German punters that attract no tax.

The federal states said that private gaming companies could bid for seven national betting licences from 2012, with the winners paying the 16.7% tax on turnover. The states' governors made it clear that bets would only be allowed on the outcome of games, not on things such as half-time results or the identities of scorers. Betting while a match is in progress, which is one of the big growth areas in the industry, would not be allowed. Licence-holders would be allowed to advertise in stadiums but not on television.

Betting companies prefer to be taxed on their gross profits – in effect, the profits they make from punters – rather than turnover. Turnover is classified as the total amount of money staked with a bookmaker, but that figure will include money that a successful gambler has already won.

The northern state of Schleswig-Holstein was the only one of the 16 German states to withhold an opinion. Kurt Beck, the governor of Rhineland-Palatinate, and Wolfgang Böhmer, his counterpart from Saxony-Anhalt, said they were confident that the states would ratify the proposed deal in the course of the year.