he European Gaming and Betting Association (EGBA) warned Tuesday that a proposal by the German Bundesrat to introduce a 5.3% tax on online poker and slots stakes would undermine the key objective of the country’s new online gambling regulations to direct online poker and slots customers into a regulated market and would be in breach of EU state aid rules.
Germany’s fourth state treaty on gambling allowing online casinos has been approved by all 16 states and will come into force on July 1. However, tax measures are yet unclear. The country’s Federal Council (Bundesrat) has sent a proposal to the legislature (Bundestag) for final approval, which is expected to be granted.
According to a survey published by Goldmedia, the tax measure would impinge upon the competitiveness of the licensed and regulated online poker and slot offer and lead to 49% of German players preferring to use unregulated websites. Meaning that players outside of the regulated market would be deprived of the protection of German consumer laws, rendering the proposed tax incompatible with the key objective of the country’s new online gambling regulation.
Furthermore, EGBA said that the proposed tax measure is punitive and would constitute illegal state aid under EU law, according to Goldmedia, given that said measure would result in online poker and slots being taxed 4-5 times more than land-based casinos and 15 times more than slots in land-based amusement arcades. The substantial tax advantage for a land-based operator would be as high as €290 million each year in the state of Bavaria alone.
Therefore the EGBA has urged members of the German parliament to reconsider the proposed tax measure when it is debated in the Bundestag in the coming weeks. EGBA has also already shared its concerns about the proposed tax measure with the European Commission.
In the case that the tax measure as proposed is adopted, EGBA will consider all options, such as a formal state aid complaint with the European Commission given that the European Commission has previously determined that differentiated tax treatment between online and land-based casinos qualifies as state aid under EU law.
Nevertheless, the country’s Federal Council (Bundesrat) proposes the opposite, a much higher tax rate on online poker and slots compared to the land-based alternative, without any obvious consumer protection or other valid justification under EU state aid law.
The Secretary-General of the EGBA Maarten Haijer, said: “We welcome the regulation of the German online gambling market, and we fully appreciate that an online gambling tax will need to be paid. However, we urge the German parliament to reconsider the proposed punitive rate of the tax because it will push German players to use unprotected and unregulated black-market websites and give land-based operators a massive tax advantage. We stand ready to share our experiences in other jurisdictions of the EU, and firmly believe that a tax level can be established which strikes the right balance between meeting the needs of the German consumer while ensuring sufficient tax revenue for the state. Should the measure go ahead as proposed, we will have to consider all available options, including filing a state aid complaint with the European Commission.”