Is Betfair going to return to Greece any time soon? That is the most common question I receive in my inbox. Obviously, my crystal ball cannot answer that.
Are they really looking forward to returning to any country that drove them off due to regulations? I doubt it, although they did acquire a gaming license to Bulgaria. So maybe there is hope after all, but only if countries ease off the taxation.
That is understandable.
With a 15% tax on revenue, Bulgaria sent most gaming operators out of the country. Since they revised their legislation and introduced 20% tax on profits (i.e. gross gaming revenue – GGR), top brands like Pokerstars made a comeback. It doesn’t take a genius to figure out that over-taxation makes business plans useless.
Yet, that is how things work it seems.
European countries noticed a couple of years ago that online gambling revenue has been on a steady uptrend the last decade. They also noticed though that most online bookmakers were operating overseas, meaning gaming operators paid taxes elsewhere.
“That can’t be right,” the financial advisors thought.
They began regulating the online gaming market, which practically meant issuing licenses at a cost. No license, no game. Gaming operators had to acquire a license to continue offering their services to residents around Europe. Acquiring a license though meant additional cost. And in gambling’s case, the cost came down to heavy tax.
Ehm, fail. Most bookmakers decided they were not interested after all. And how can you blame them, when over-taxation brought profit margins to their knees? If you sell a product for $100 and your net profit is $25 long-term, how can you accept paying 30% tax on revenue (GGR)? Your business will run out of money mathematically.
Bulgaria proposed 20% tax on GGR and got gambling companies back. They will in turn contribute to the nation’s GDP and everyone will be happy. Bookmakers will increase their revenue by accepting Bulgarian gamblers, Bulgarian administration’s cashier will benefit from the additional income and Bulgarian citizens will be able to bet or play poker at their favorite company, joining millions of other people abroad.
A win-win-win scenario.
Greece on the other hand believes that a 30% tax on GGR still allows a viable business plan. Yet, big gaming companies are no longer accepting players residing in Greece for 15 months now. They must be nuts to leave a market worth €250 million, huh? One of them is Betfair; but that is also part of the “no betting exchanges allowed” part of the Greek legislation. Go figure.
As if that wasn’t enough, Greek law also prohibits any “commercial communication” with unlicensed operators. In plain English that means Greek webmasters cannot advertise or promote blacklisted bookmakers. Again, it makes no sense after all to advertise a company that doesn’t allow customers from your country. You will get no new registrations and the company itself will not be interested.
So, why bother?
Greek news media and sports websites that relied on these advertising deals have now limited options. They can only promote a handful of licensed companies. These companies on the other hand do not have to compete with well-budgeted big companies for the available advertising spots. Less competition, less advertising cost, less revenue for the media. With less money coming in, news and sports sites need to cut money going out, which leads to jobs cutting.
What does over-taxation of gaming companies accomplish?
- No interest for a license, companies leaving the country. People cannot bet at world-class companies.
- Less revenue, less tax and ultimately less money for the government. Was that the purpose of the whole regulation thing?
- Fewer jobs, increased unemployment. Congrats!
A lose-lose-lose scenario.
Lawmakers have also included fines for anyone disobeying the law. Is it a crime to wear Betfair-branded t-shirts at the local gym, if you are not involved in a commercial deal? I am sure it is not. Look elsewhere for the crime conducted.
Just like overtraining at the gym is bad for your muscles, over-taxation is bad for everyone’s business.