Frankfurt introduces a tax for gaming machines.
Frankfurt am Main (Hesse) is set to collect more cash in its budget with a new 5.5% tax on gaming machines in amusement arcades and restaurants coming into effect on July 1st. This decision was made to keep the illegal gaming machines at bay. How will this move unfold?
"Frankfurt playing it fair"
The Frankfurt city council has unanimously rolled out a new tax regulation for gaming machines, where machines giving out winnings will be taxed 5.5% of the stake, while the tax rate for machines not giving out winnings will be 4%. Previously, there was a 20% levy on the gross cash.
Michael Wollenhaupt, the Chair of Hessian Coin-Operated Machine Association, which represents over 300 companies, admitted that the city was being fair. However, he raised questions over whether the tax reform would be tax-neutral, meaning it should not impact business operations. He shared, "We got the draft tax statutes from the tax office beforehand. We won't know if it's tax-neutral as claimed until October 15, when our members file their first tax returns."
The Frankfurt city council is confident that the reform is "legally safe" and will bring in enough funds while reducing the number of gaming machines without causing losses. The city only introduced a new tax on gambling earlier in 2018.
Tougher checks ahead
Jackpot amounts from previous taxation was 16.3 million euros. Treasurer Uwe Becker (CDU) informed the Finance Committee that this amount would be maintained with the new statutes. He also mentioned that some shifts in revenue are possible.
To ensure the law's implementation, the Gambling Devices Working Group (GSG) was established in 2018 in partnership with Frankfurt police. The group will now collaborate more closely with tax authorities and supervise the collection of the new gaming machine taxes. Personnel from the public order office will be inspecting both amusement arcades and restaurants regularly, often at night and unannounced.
Taking out illegal gaming machines
Every year, thousands of gaming machines are hiding in the shadows of Frankfurt. Not all of them are registered. In 2018's raid, GSG found 147 administrative offenses, initiated 14 criminal proceedings, and discovered 1.5 million euros in tax evasion. Some of this was recovered through enforcement actions. 104 illegal gaming machines, weighing between 150-300 kilograms, were seized. 46 of these were destroyed with an 18-ton truck.
Wollenhaupt, nodding in approval of the operation, said, "Illegal machines must be taken off the market". Around 60% of gaming machines are installed in arcades, while the rest is in restaurants. Up to 90% of the stake is returned as winnings because "gambling is only fun if you win".
The association chairperson also pointed out that the state gambling laws identify the gaming machine tax as an 'amusement tax', which can be collected by cities and municipalities. It is classified as an expenditure tax as it taxes the player's cost for the gaming experience.
Amusement industry facing the heat
In line with the new taxation, a large number of amusement arcades in Frankfurt are facing closure due to the new State Treaty on Gambling. Out of 164 establishments, only 130 remain, with 34 closures last year. The primary cause behind this is the mandated 300 meters distance between gaming establishments.
This distance rule also applies to gaming arcades, schools, and daycare centers. Düsseldorf has faced a similar situation, with 100 arcades at 65 locations needing to come down to 34. This order is to be implemented by July 1, 2021.
The tax and legal issues showed how serious the industry was struggling with the new regulations. For instance, Düsseldorf's amusement arcades are seeing a drastic fall from 100 to 34 in a year. Such issues can potentially lead to a significant reduction in gaming arcades across Germany.
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Source: www.onlinecasinosdeutschland.com
