Düsseldorf Institute for Competition Economics (DICE) has warned that the proposed 8% gambling tax would be bad for the market and players.
DICE Warns Against 8% Gambling Tax
A recent report, compiled by the Düsseldorf Institute for Competition Economics (DICE), warns that Germany’s proposed 8% slot stake tax could undermine the country’s regulated gambling market.
The report was commissioned by the two German operator associations, the Deutscher Sportwettenverband (DSWV) and the Deutscher Online Casinoverband (DOCV), in response to recent tax recommendations made by the State Finance Ministries of Hesse, Nordrhein-Westfalen, Bayern and Berlin.
The aforementioned Finance Ministries have proposed an 8% tax on online slots and a 5.3% tax on poker stakes. DICE’s report argues that such a high tax percentage could harm Germany’s regulated gambling market as it would make legal gambling too unattractive for players. This would in turn push them to the illegal market, the report argues.
An 8% tax would not only reduce possible payout ratios, but it would also dampen competition, DICE warns. Combined with the possibility of chasing potential players away, this would create a particularly difficult environment for Germany’s gambling industry. This may prevent the market from meeting its channelization targets, which would in turn make player protection measures less effective.
Tax Proposal Would Do Nothing For Player Protection
DICE, helmed by Director Justus Haucap, also warns that the Finance Ministries’ proposal is based on the presumption that the volume of previously illegal gambling would not increase. The Institute argues that data and experience from abroad have proven that these assumptions are unrealistic and incorrect.
The 8% tax proposal was made with player protection in mind, a fact that does not elude DICE. However, the Institute argues that the State Treaty on Gambling already offers multiple other player protection measures. This includes a €1,000 monthly deposit limit and a €1 stake limit on slots. Therefore, the tax proposal will likely not add much in terms of limiting addiction.
According to DICE, setting the tax level at 8% would mean that games would have to reduce their return-to-player (RTP) rates. An example presented in the report shows that a game with 96% RTP would have to drop to 88% RTP in order to maintain the same profitability if taxes are set at 8%.
The Institute also warns the proposal will harm the country’s casinos. If casinos keep their RTP unchanged, they would actually be at a loss if Germany adopts the tax recommendations. This naturally means that RTP would have to be reduced out of necessity.
DICE has proposed that taxes should instead be calculated based on gross revenue and set between 15% and 20%.