Business04 May 2022

The 1% Betting Revenue Tax - What will it mean for sports betting websites?

The 1% Betting Revenue Tax - What will it mean for sports betting websites?

While remote sports betting may not have enjoyed the exponential growth recorded by the online casino vertical of late, it remains a key contributor to the Italian economy.

It’s also fair to say that this lucrative market has now fully recovered from the challenges posed by the coronavirus pandemic, with combined on and offline revenues up by a whopping 46.9% year-on-year in January 2022.

Of course, it can be hard to determine which is the best betting website in Italy, as there are a lot of Italian websites active within this vertical. However, these entities are all facing the prospect of paying a new fixed tax on all betting revenue going forward, creating a significant financial challenge and potential issues for future market growth.

A Quick Overview of Sports Betting in Italy

If we delve deeper into the figures from January 2022, we see that the recent trend for incremental growth continued in the remote betting space.

More specifically, total online sports betting GGY ticked up slightly month-on-month to €128.8 million, while this trend is expected to continue in the near-term (particularly as the Serie A title race has continued to intensify during the Easter period).

When you also factor in the performance of the retail sector, overall sports betting revenue peaked at €211 million in total. This figure also highlighted nominal growth when compared with the numbers recorded in December 2021, although there’s no doubt that remote sports betting remains the dominant driver of market growth.

All-in-all, these figures are indicative of a sports betting market that remains in robust health, which in turn continues to generate significant revenue contributions for the Italian treasury.

Introducing the Fixed 1% Betting Tax - The Key Considerations

Despite continued growth, online bookmakers in Italy have continued to face an increased burden of taxation.

For example, even the best online betting sites in Italy were saddled with an additional 0.5% betting levy on all sports bets placed through the duration of the Covid-19 pandemic. This was used to help support the wider sports industry in the country, as part of the Covid-19 Revival Decree aimed at stimulating growth in different parts of the economy.

This tax was finally withdrawn after a period of 18 months towards the final quarter of 2021, having helped inject €90 million into the nation’s treasury.

Now the industry is braced for another new tax, in the form of a fixed, 1% levy on betting revenues. In less than two weeks’ time, the Italian Undersecretary for Sports Valentina Vezzali will reconvene and meet with the fiscal ministries to finalise these plans and announce a time-frame for implementation.

Each ministry will be asked to present its own version of this tax proposal, and if approved, is projected to generate around €160 million in additional revenue for the treasury.

The tax levy will be applied to all sports betting revenue generated by online bookmakers, with this adding to the 20% GGY tax rate payable by all brands under normal market conditions.

What Does This Mean for Sportsbooks and the Market as a Whole?

At first glance, the addition of a nominal 1% tax rate doesn’t seem too much of an imposition for betting brands.

However, this must be viewed in conjunction with the standard GGY tax rate of 20% applicable to sportsbooks in Italy, alongside other considerations such as corporation tax.

What’s more, even this nominal tax levy is likely to represent an equivalent revenue cut of between 10% and 20% for Italian sportsbooks, including both the largest and best betting sites and independent operators within the vertical.

This trend is typical in mature markets of this type, of course, as regulators look to focus on areas such as regulation and governments start to monetise the industry as a way of driving wider economic growth.

However, the combination of increasingly stringent regulatory measures and additional tax levies can prove counterintuitive over time, creating a scenario where sportsbooks struggle to maintain growth as their profitability dwindles.

What’s more, such a landscape can inadvertently create a huge advantage for black market operators. The reason for this is simple; as licensed betting brands will have to adapt to the new tax regime by adjusting their prices and passing the additional cost at least partially to their customers, creating a less profitable experience for bettors in the process.

Black market and rogue operators can leverage this to their advantage, as they’re completely unencumbered by the need to comply with tax legislation and can deploy more competitive pricing to undercut their rivals.

Unsurprisingly, licensed betting brands are overtly opposed to the new tax, citing the boost that it will provide to rogue operators as the primary reason for their objection.

Of course, others will suggest that sportsbooks have more selfish reasons for their opposition, but there’s no doubt that regulators should think long and hard before imposing the fixed 1% tax levy on licensed betting brands.




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