Swedish parliament considers lowering gambling tax following recent increase

In a surprising twist, the Swedish Parliament is now thinking about cutting gambling taxes, just a few months after raising them this summer. The move, led by Moderate Party member Carl Nordblom, looks to tackle increasing worries about a drop in the number of players using licensed gambling sites in Sweden. While this may not sound like a bad thing, it could have some dangerous unintended consequences.

As with all economic policies, unintended consequences are difficult to predict, and negative externalities are how we measure downturns in welfare and utility. In this case, the proposal follows industry warnings that the tax increase – which was from 18% to 22% on gross gaming revenue – might push players toward unlicensed operators. 

As Sweden tries to balance regulation with market demands, this shift in policy shows the tough challenges facing the country's gambling sector. As the regulators know (but some customers may not), the best online casinos, like the verified list on plainenglish.io, are the regulated ones. Such verified lists for safe gambling aren’t always used by customers, who may otherwise be tempted by social media promotions.

The July 2024 tax hike

On July 1, 2024, Sweden raised its gambling tax rate from 18% to 22% on gross revenue. The increase was approved in May and brought about some immediate mixed reactions. 

While the Swedish gambling regulator, Spelinspektionen, did not actually oppose the hike, it did warn that it might be hard to assess the full impact. Well, they were right, because many now think that players will not stick to licensed gambling options.

The government defended the tax hike as a way to boost state revenue, something that many European economies are struggling with right now. They estimated a gain of SEK270 million (£20.4 million) in 2024 and SEK540 million (£40.9 million) annually from then on. A non-insignificant amount. 

However, some industry voices spoke out, one of which was the Swedish Trade Association for Online Gambling (BOS). BOS Secretary General Gustaf Hoffstedt predicted that unlicensed and illegal gambling operators would grow their market share because of their newfound tax advantage. Ultimately, when costs are lower, unlicensed casinos can offer better odds, and promotions, or even lower their house edge because they needn’t recoup quite so much money to make the same net profits.

Carl Nordblom's motion: A push for tax reconsideration

On October 2, 2024, Carl Nordblom of the Moderate Party proposed a motion in the Swedish Parliament. The motion was to revisit the recent gambling tax increase. His proposal focuses on how tax policy affects channelization rates — the percentage of players using legal gambling options. 

Nordblom argues that it may be in the best interest of everyone, from the government to the players, to draw more players to licensed operators. Furthermore, it may also be that tax revenues don’t see as much of a rise as expected if unlicensed operators gain a bigger market share. If the motion succeeds, it would be a very fast U-Turn for the Swedish Parliament.

The black market threat

The risk of black market growth is already a concern, particularly with crypto casinos being on the rise. BOS estimates that approximately between 2,000 and 6,000 people might switch to illegal gambling due to higher costs, which not only decreases player safety but weakens regulatory control across the board.

Although the Swedish Gambling Authority reports a current channelization rate of 86%, an improvement since 2019. Some reports suggest the rate might have dropped to between 69% and 82%, which would mean the tax increase may have a much greater impact than expected.

Gustaf Hoffstedt, the BOS’s Secretary General, warned that the higher tax could lead to about 1,000 more people experiencing gambling problems. BOS commissioned a study by Copenhagen Economics and it predicted the tax would shrink the legal market's share by 1.2-2.5 percentage points. AB Trav och Galopp (ATG) also echoed these concerns, suggesting that the tax disproportionately affects certain parts of the industry

Sweden’s standing in the European gambling market

With a 22% gambling tax rate, Sweden falls in the middle range among European countries. This is an important perspective to have. The UK’s is only slightly lower, while most countries are within a few percentiles range. The Netherlands, however, is 29% and is facing much less controversy.

The EU does not have a unified gambling framework, but this may be something that is considered in the future. By leaving regulation up to individual member states, we have seen a variety of approaches.

Final word

As Sweden essentially A/B tests its current gambling environment, it’s clear that money doesn’t always talk. Currently, control and regulation are of great priority for Sweden, with channeling towards illicit operators being the worst possible outcome. It may also be that if the U-Turn motion doesn’t succeed, the additional revenue gained from the tax hike could be allocated toward responsible gambling education. Ultimately, it’s better for customers to know the importance of choosing licensed operators.