Italy Considers Rise in Sports Betting Taxes

One of the many tangible benefits of a regulated gambling industry is the flow of revenue it creates. Not only is this good for jobs and the wider economy, but it’s also a significant boon for governments, providing real money that can be used to develop public services and invest in infrastructure and development.

Across much of the world, territories that haven’t yet developed their gambling market are pushing towards legalisation and regulation, bringing gambling activity out of legal grey areas and into the regulated mainstream. This can be seen most prominent in South America, with several countries such as Peru and Colombia in the process of regulating and taxing their domestic gambling industries for the first time.

For those that have already developed their regulated gambling sector, the question then becomes one of how to extract the most possible revenue from the industry. Like any other, the tax take from the gambling industry is incredibly fluid in response to customer demand, and there are debates to be had about whether hiking the rates of tax on operators leads to greater, or smaller, revenues in the long-run.

Nevertheless this is a quandary regulators and governments across the globe are faced with, and it’s one the government in Italy is currently holding under review.

Initial drafts of the 2018 budget are pointing towards a possible increase in the tax levied by the Italian authorities on sports betting operators, including those who operate on land and online. Under the proposals being considered, the rate of tax for land based operators would increase by one percentage point from 18% to 19%, while online operators would be stung with an increase from 22% to 23%.

According to local sources, there are alternative plans under consideration by the Italian Ministry of Finance which could seek to split the difference, and settle at a rate of 21% across the board for both online and offline operators, in addition to adding another few thousand euros to the annual cost of licensing for offline premises.

Italy previously overhauled its system of taxing sports betting a couple of years ago, following complaints from operators about the previous system of taxing turnover – a taxation base that bears no connection to profitability, and left many operators in a challenging situation.

Since the tax laws were changed, the industry has rewarded the Italian treasury with double digit growth year on year, as well as an expansion of services to encompass a wider variety of choice for consumers.

The budget also holds proposals for reducing the numbers of slot machines, video lottery terminals, and other types of betting products, which regional governments will be tasked with enforcing over the months and years to come. As part of this aspect of the proposals, existing concessions will be extended until the end of 2018, to allow time for the new legislative proposals to bed in, as regulators and governments across the country adjust to the new picture.

As the Italian authorities saw with their own eyes, the wrong tax policy can and does seriously restrict the ability of certain industries to operate successfully and grow. Removing the old turnover tax saw the restrictions largely lifted from the industry, which in turn continues to post strong growth. But raising the tax take under the current system could also have unintended consequences, and it’s not a given that this would certainly lead to higher revenues for government coffers.

It remains to be seen how the final policy proposals will shape up, and the budget is still in the initial drafting stages. However, with the choice for regulators looking like an either-or where both involve raising taxes, sports betting operators in Italy will no doubt already be on their guard for further changes to the industry.