Betfair Exhange Became Less Compelling to Bettors in Italy

Sports betting exchange leader in Italy Betfair Exchange expressed concerns its flagship product lost much of its competitiveness and appeal following the controversial turnover tax imposed by the government last summer.

Unsustainable Turnover Tax

As part of the “Revival Decree” the Italian government imposed a 0.5% turnover tax across retail, digital and virtual sports wagering, and the measure which would be applicable by the end of 2021 prompted reaction from the exchange operator in October.

The owner of Betfair Exchange, Flutter Entertainment, sent a notice to the ADM that the increase in taxes made the business unsustainable. The operator warned that the exchange may face a removal from the Italian market should the agency maintain the temporary tax charges.

Flutter argued further that the way for calculation of the turnover tax for betting exchanges put forward by the government agency, in addition to other corporate taxes, would make the business structurally uneconomic, facing an overall tax of 111%.

ADM’s instructions on how betting exchanges should implement the temporary turnover tax stated that the tax base should be the “sum of all amounts matched between lays and bets, minus betting tax”, for each individual market.

3% Hike in GGR Tax as Alternative

Instead of the unfair turnover tax, Flutter suggested that the ADM replace the tax with an additional 3% to its gross gaming revenue (GGR), offering its Betfair Exchange which dominates the Italian exchange market place by its 96% market share to pay a total of 23% tax on GGR.

The response from the ADM was not what the sports betting operator expected, as the customs and monopolies agency stated that the exchange should follow the instructions put forward and calculate the turover tax accordingly.

The statement from the government agency solved one issue for Betfair by creating another, as the proposed way for calculation of the turnover tax implied that players with winning wagers on the exchange would have to face a higher commission charge, and in some cases, there is a likelihood that they would have to pay more tax than their net winnings.

Flutter Entertainment expressed discontent at the lack of understanding shown by the ADM, outlining that the turnover tax imposed on its Betfair Exchange impacted the competitiveness of its flagship product and made it less appealing to bettors.