Research cautions against implementing a deployment tax.
The Interstate Treaty on Gambling (GlüStV) is now being implemented, allowing for online casinos, sports betting, and poker to have a legal market presence from July. As part of this regulation, the Federal Council aims to adjust the Racing Betting and Lotteries Act, with online poker and slot machines facing a 5.3% tax on stakes. Will this new tax regime result in the market's collapse? A report from market research agency, Goldmedia, suggests so.
49% Player Migration to the Shadow Market
This planned stake tax has sparked considerable debate. As most of Europe practices taxing gross gaming revenues, universities in Bochum and Düsseldorf have already cautioned against it. Despite the projected 1.3 billion euros in potential tax revenue for Germany, licensed providers are concerned about becoming uncompetitive.
A study conducted by Goldmedia, a consulting and research service provider in the media, entertainment, and telecommunications sectors, reveals concerning results. It indicates that a 49% player migration to the black market is possible. Supporting the licensed sector, which is the goal of GlüStV, could be severely jeopardized by this shift. The study was commissioned by gaming companies Entain, Flutter Entertainment, and Greentube, among the first German licensees. Based on the research, Goldmedia ascertained that under this tax model, providers would have to decrease their payout ratios (return to player, RTP) from over 96% to at least 90%. This would lead to a decline in legal offerings' usage to approximately 51% - 49% of expenditure would go towards the unregulated sector, owing to more favorable conditions.
Open Market: Tolerance and Regulation Phase
For a long time, gambling was prohibited in Germany. Instead, the government maintained a monopoly on lotteries and sports betting. Foreign EU-licensed providers maintained a precarious legal status. In the Schleswig-Holstein region, however, the state's restrictions were challenged in 2011 through the issuance of licenses for reputable online casinos in 2012.
As other states follow suit, a Germany-wide transitional framework has been implemented since October 2020 to ease the transition into a regulated market from July. Goldenmedia's study focused on online casino and online poker usage during the toleration and regulation period. The survey, conducted among 619 online casino users in April 2021, yielded valuable insights:
Evidently, compliance with industry standards was not a top priority for the majority of players. It's worth noting that 31% of participants admitted to using illegal sites at least once a month, and 27% regularly visited non-compliant platforms. A SEO analysis demonstrated that unregulated sites received significantly more traffic than lawful websites.
Currently, 73-75% of regular online gambling users access platforms that fail to meet the regulatory requirements - based on the selection criteria of online slot machine players. However, the results underscore the prevailing sentiment: payout ratios matter more to players than a German license and the associated safety features like a €1000 monthly betting limit and €1 per spin limit.
Tax Impact on Online Poker
The proposed equivalence between online poker and slot machines is drawing criticism. Particularly concerning is the potential fallout for online poker, as players' winning chances are significantly lower here than on slot machines. The 5.3% tax would be equivalent to an extra rake in poker.
According to the bill, in online poker, money brought to the table is considered the stake. If a player presents €200 at the table, they effectively have €194.7 left. This means that the bankroll would swiftly disappear in fast-forward games. The tax would make poker participation less attractive.
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Source: www.onlinecasinosdeutschland.com
