wC has warned the Portuguese government gambling authority that the proposal would lead to a “small” and “inefficient market.”
PwC's recommendations were expressed to Portugal's in a study for the Remote Gambling Association (RGA) and presented to Portugal’s Commission for Economy and Public Works.
Turnover-based Taxation the Concern
The misgivings were specifically based on the government's plan for a turnover-based levy. PwC's proposed solution was a switch to what they called an alternative gross gaming revenues-based tax model, an adaptation which PwC estimates could be worth an additional €20m in tax receipts within three years.
RGA was vociferous in its support of the study, saying that “Current taxation plans will lead to the loss of competitiveness for regulated operators and encourage consumers to use the non-regulated market.”
French example of market reduction
The concern was rooted in the French market's bottoming out, as a similar tax plan approved there resulted in the departure of 18 of 35 after regime's first year due to lack of profitability.
In general, PwC has pointed out that the market percentage of license operators in turnover-based tax regimes has so far led to unfavorable absorption rates (the amount of operators participating in national markets). Private operators are clearly turned off by presiding government taxes being fixed to profit levels, where the more an operator makes, the more taxes they have to pay, discouraging successful enterprise.
The study pointed out how other similarly taxed countries have experienced immediate market reduction, with GGR-taxed countries such as Denmark (82% absorption) and Spain (52%) already showing operator losses, with the trend continuing downward with France (25%) and Portugal expected to be lower than 20%. In other words, PwC projects over four fifths of licensed operators to cease operations in the first year of Portugal's proposed regulation system.
Moving forward, it would clearly be prudent for governments to consult research and real-life precedents in adapting incoming tax regimes if they want to experience sustainable benefits.