Figures from Spain and Bulgaria suggest that many countries may soon be turning to gambling to solve tax revenue and employment problems.
In 2013, the government in Bulgaria changed the legislation on how gambling companies were taxed. Having previously been subject to a stiff tax regime, from 2013, land-based operators in Bulgaria have been taxed not on turnover or revenues, but on the number of gaming devices they feature, whilst online firms saw their basis of taxation moved from 15% of turnover to 20% of revenues.
The result of these changes has been a significant increase in the number of gambling operators registered in the country, with 1,327 registered companies now engaged in betting and gambling.
In total, the Bulgarian-based gambling companies brought in around BGN 3bn ($1.9bn, £1.34bn) in 2017 – which meant a hefty tax take for the Bulgarian government, with the industry paying taxes of $111m (£78m) in 2016 and $90m (£63m) in the first nine months of 2017.
There has been some grumbling from other industries in Bulgaria – not least the tobacco industry, which pays a far higher share of its revenue in duties and taxes – but the Bulgarian government rightly recognises that gambling is a highly mobile industry.
You suspect that there wasn’t a country in the world that didn’t have someone placing a bet on last night’s Real Madrid–Juventus game in the Champions League, and a significant percentage of those bets will have been placed with companies not registered in the same country as the person placing the bet.
So, Bulgaria, like an increasing number of national governments, is accepting that some tax take is better than none.
Spain follows suit
It is a similar position in Spain, where online gambling and betting is set to become a billion-dollar business.
A recent report quoted consultancy firm Ficom Leisure, which said that Spain is “now on the radar of the international [gambling] market”. It predicted that Spain’s annual gambling market will hit €1bn ($1.23bn, £870m) to €1.5bn ($1.85bn, £1.31bn) in the next three to five years, with online sports and casino gross revenues having already reached €560m ($687m £484m) in 2017.
Recognising the trend, and the potential for both tax revenue and employment, the Spanish Congress of Deputies (the lower house of parliament) has just proposed cutting taxes on online fixed odds sports betting, exchange betting, and fixed odds horseracing betting to 20% from the current rate of 25%.
It is only a proposal at this stage, but it would clearly offer a significant boost to operators’ bottom lines, and make Spain a more attractive base for gambling companies.
At the moment, online betting in Spain is largely confined to soccer, basketball, and tennis, but operators are also likely to start including horseracing on their sites, a market which has significant potential for expansion in Spain.
Will more countries go down the same route?
It seems inevitable that other countries will follow Bulgaria and Spain in enacting legislation to make themselves attractive homes to betting companies. Yes, that may well lead to conflict with the more traditional elements in those societies – the Catholic church in Spain is unimpressed by the proposals for lower taxes on gambling companies – but the need to generate tax revenue is likely to win the day. Add in the fact that many countries such as Spain are still struggling with high levels of youth unemployment and Mammon will be a short-priced favourite in this particular struggle.