Taking a closer look at the legal framework and the new regulations caused heated debate and raisedmany questions from the industry experts. Many of these new regulations directly contradicted the intended goals of the treaty, let alone the fact that there is no evidence to suggest that the imposed limitations would provide full player protection or further prevent gambling addiction, making themarbitrary and excessive. Therefore, while the goal of the ISTG 2021 was to correct previous discrepancies, the new law is commonly referred to as punitive and unconstitutional. It is more restrictive than similar frameworks inmost neighboring European countries. The controversy surrounding the ISTG 2021 is mainly caused by the newly adopted, extremely high tax rate on stakes. The treaty introduced an additional 5.3% turnover tax or, simply put, tax on each stake for online poker, virtual slots, sports betting and horse racing. However, for even more transparency, we should mention that, since the tax is deducted from the tax base, the effective rate is 5.3%. Lastly, the tax is self-declared and has to be declared on a monthly basis. Before we start criticizing the 5.3% tax, let us try to take a step back and look at the tax from the legislator’s perspective. If we consider that the above-mentioned tax is the same for sports betting, slot machines and poker, we realize that this is a classic case of legislators trying to set uniform taxation. Again, from the legislators’ perspective, it is utterly convenient to have the same tax rate in the industry. Why? Well, because that way, it is easier to measure and control. However, that is not the case for businesses. Poker and slot machine providers objected to this tax rate the most, more than sports betting operators because they are constructed in a way that involve multiple levels of betting cycles. Thus, it did not seem fair for these games to be taxed on each betting level. As a result, slot providers that wanted to legally operate in the German market were forced to lower the Return to Player (RTP) to be able to pay tax and stay profitable at the same time. Furthermore, the 5.3% tax was named as the main reason why PokerStars and Partypoker left the German gambling market. When discussing the new tax regime, we also need to address Betfair Exchange’s case as well. Betfair Exchange is a somewhat new model of sports betting. It is the world’s largest online betting exchange, allowing punters to bet against each other rather than a traditional bookmaker. Betfair Exchange tried to argue that it should be exempted from the additional tax. However, since they could not reach an agreement, Betfair withdrew its core gambling products from the German market, such as Betfair Exchange and Betfair Poker. To sum it up, we can confidently speculate that the stake tax of 5.3% is considered extremely high, causing more damage than good in the German gambling market. We clearly saw how business operators reacted to the new regulations; however, the next question is: How will German punters react to the new gambling reality? Will the tax rate of 5.3% in online casinos lead to players preferring the black market? What can be done to avoid this? As already mentioned above, the new tax regime instantly became a controversial topic and, to this day, remains a subject of heated debate among industry experts. Several surveys conducted on the German market suggest that punters in the country actively consider playing at alternative casinos without a German license. The paragraphs below will look more into technical details to shed more light on why a 5.3% tax regime is such a “big deal.” Let’s review virtual slots as an example and analyze how the virtual slot providers have to adjust to the significant changes caused by the new stake tax. It is no secret that slot machines operate with a predetermined RTP percentage. Theoretically speaking, the higher the RTP, the more rewards a player gets. RTPs vary from provider to provider; however, 95-97% is industry-standard. But German licensed casinos cannot have an RTP over 94.7%. By doing so, the casino will break even on a bet level. Benchmarking this to industry standards shows that playing online slot games in German licensed casinos would be less attractive for German punters than playing the same slot games in foreign casinos. Additionally, it is not only a new 5.3% tax rate causing mixed feelings in the German gambling market. The ISTG 2021 came CLOUDS OF CONTROVERSY IN GERMANY Yes, onlinegambling became legal, but it came witha heavycost – strict regulations, a punitivetax regime, and poorandless rewardingRTPs oncasino games. Who will bepaying this highprice? German punters, of course. G P W A t i m e s . o r g 32
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