Decrease of 27% in tax income derived from virtual machine games in Germany
The Finance Ministry's Tax Report for May 2024 shows a 27% decrease in revenues from virtual slot machines compared to the previous year, with only 15.49 million euros collected last month.
A reduction of 5.74 million euros compared to May 2023
The Finance Ministry regularly shares a comprehensive breakdown of taxes collected at the federal and state levels on a monthly basis. This covers revenues from the racing and lottery tax, which also incorporates virtual slot machine tax.
May 2024 saw a substantial decline in tax revenues from virtual slot machines. The drop from 21.23 million euros to 15.49 million euros is considerable, even with an overall increase in racing and lottery tax revenues.
Johannes Brecher, a marketing expert specializing in the gambling industry at lead link GmbH, discussed this significant decline on LinkedIn. According to him, no other German gambling game has seen such a decline. Poker, on the contrary, is on the rise. The first provider to offer these games has even handed back its license and shifted focus to other markets. Brecher also suggested that reduced marketing expenses may trigger a chain reaction, further affecting providers' revenues.
Virtual Slot Machine Tax (§ 38 RennwLottG) in Germany
Section 38 of the Racing and Lottery Act (RennwLottG) dictates that 5.3% of the tax base must be paid as tax for virtual slot machines. Typically, the tax base is equated to players' stakes.
However, upon examining the official form for reporting virtual slot machine tax, it becomes clear that the tax base in practice relies on additional factors, such as granted bonuses.
Regardless, it's discernible that online gambling enjoys tax concessions over brick-and-mortar gaming halls, which some operators suggest is why many gaming halls across Germany have lost their appeal, boosting the black market.
Potential reasons for the decline in tax revenues
Experts have shared their thoughts on Brecher's LinkedIn post as to why tax revenues from virtual slot machines have dropped.
Robert Lenzhofer, CEO of Hölle Games, suspects a link between the decrease in virtual slot machine tax and operators' adjustments to online slot machines' payout percentages. Lower payouts can reduce the statistical playtime on a machine, thereby decreasing the tax based on stakes. Christian Heins, Director iGaming at Tipico, endorses this theory.
Frank Hesse, Director Marketing & Sales at ODDSET, expresses concern that only casual players may remain on the legal market, while frequent players might opt for the illegal offshore market due to the absence of virtual table games.
Lastly, there are voices reminding us that fluctuating tax revenues can sometimes be due to factors like late payments and corrections. Some even suspect that some illegal providers might pay taxes to avoid scrutiny.
Given the 27% decrease in revenues from virtual slot machines in May 2024, online casinos operating in Germany might be experiencing similar financial challenges. The reduction in tax collections, from 21.23 million euros in May 2023 to 15.49 million euros in May 2024, could indicate a shift in gambling preferences or operational strategies among these online casinos.
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