A Closer Look at the Gambling Tax Increase in Italy
Italy is looking to counterweight an increase in criminal activity in the iGaming and gambling industry by tightening tax control over the segment. With the country posting stronger results in the sector in 2019
, more organized crime groups have entered the segment in a bid to corner the market, launder money and establish illegitimate gambling operations.
In response to the growing incidence in illegal gambling, the government is now introducing an overhaul of the tax system for both the retail and online gambling industry. The government has had a strong control over the market, long resisting European Union (EU)
regulation to open up the market to international businesses in the gambling space.
Italy gave a firm ‘no’ in 2006 but gradually fell in line with European legislation by 2010 when the country welcomed new entrants in the sector. The country’s regulator, the Agenzia delle Dogane e dei Monopoli (ADM)
, began accepting license agreements from multiple parties.
Even today, in the context of a market attacked by the populist government, companies continue to seek entry into the market. Malta sports betting giant, Efbet, signed licensing agreements with the regulator, amid restrictive measures for gambling advertisement in public, including physical and online spaces.
An Advertising Ban Gathering Momentum
At the behest of Italy’s Five Star Movement-Democratic Party
coalition government the industry is now facing sterner regulatory measures. Apart from seeking restriction on online advertisement and gambling as a whole, the ruling coalition is also bumping licenses fees to $2.2 million for online gambling.
Anticipating the changes in taxation, big International brands, including William Hill
, Paddy Power
and The Stars Group
all bought up their licenses at estimated $221,000 before the new licensing rules came into effect.
Results have been fluctuating as well. In general, online casinos have faired better in September 2019, when they brought in around $80 million, up 22% from a year before. Yet, Italian MPs have more planned for the gaming industry.
The Tax Is Going Up
The 2020 fiscal budget doesn’t only anticipate increase in the level of licenses, but also the tax on gaming. For example, lottery jackpots will now be levied with a 20% tax from previously 12%. While not everything has been confirmed, the government may now be planning to also levy winnings greater than $600 with a 12% tax.
Gambling companies fear that over-regulation could lead to drop in interest in the industry. Yet, a broad group of lawmakers, including Laura Castelli
, Deputy Minister for the Economy, believes this is a sure-fire way to snuff out illegal gambling in the country
There is little to suggest this, however, as it is usually legal businesses that report their winnings whereas illegal operators just use alternative channels to lure in customers. Meanwhile, Italy’s prosecutor’s offices estimate that Italy’s illegal gambling industry amounts to over $4.43 billion, a formidable amount. Yet, slapping legal businesses with even more restrictive measures and taxing winnings would probably have an adverse effect, industry experts believe.