Poland’s new online gambling laws were, in theory, meant to build a more competitive and player-protective market. Instead, highlight the government’s intense greed, driving major operators out of the region due to an exorbitant tax rate that goes beyond what other jurisdictions deem reasonable.
On the whole, Poland’s new regulations seem to concur with other European markets. Operators must apply for licence, and must comply with strict player protection rules. But there’s one element that differs. Poland is collecting 12% tax from each operator’s turnover.
The new regulations went into effect on April 1, 2017, and already, global giants like Bet365, Pinnacle Sports, Paddy Power and William Hill have exited the Polish market.
12% Turnover Tax Too High
In other European jurisdictions, taxes are usually collected based on a company’s gross revenue. The UK, for example, collects 15% point of consumption tax on gross revenue from players’ wagers originating from the UK.
Poland, on the other hand, has chosen to tax an operator’s turnover, and that equates to a much, much higher taxation than 15% of gross revenue.
In some countries, like the US, gross revenue and turnover have the same meaning. That’s not the case in Europe. Turnover is defined as all proceeds generated from business, while gross revenue is defined as proceeds after cost.
To put that into perspective, William Hill’s 2016 Final Results reported a Net Revenue (turnover) of £1.6 billion. But the Adjusted Operating Profit (Gross Revenue) came in at just £261 million.
Poland can only tax revenue based on proceeds derived from Polish customers, which would be a mere fractions of the total earnings listed above (if the company chose to stay). But for arguments sake, the difference in 12% of turnover versus 12% of gross revenue, would be 192 million compared to 31.3 million.
Online Gambling Laws Deter Operators
We’ve seen this before in other regulated markets, especially in Europe, where high taxation in online gambling laws has been great for government, but very bad for business.
In 2010, France imposed a high tax rate of 8.5% turnover for online sports betting. That’s 8.5% of all wagers taken in, before accounting for winnings paid out. The government is raking in the cash, but operators have been losing money ever since. In the first five years, the government collected over a billion euros, while French-licenced sportsbooks lost more than €220 million combined.
The situation is similar in Spain, where online gambling laws enforce a 25% tax on gross revenue (earnings after cost). There’s just not enough room to compete or grow when the government imposes such high taxes, and it’s caused an exodus of operators in each of these locations.
Are Canada Online Gambling Laws Worse?
In Canada, operators aren’t even given the choice to acquire a licence and pay taxes to compete in the market. Only the provinces of British Columbia, Ontario and Quebec offer regulated iGaming, and they all hold monopolies on the activity by mandating that only their respective government can offer online gambling.
Laws like these don’t bode well for players, who are essentially forced to play at the highly restrictive Canadian-regulated websites – where promotions are all-but non-existent and sports bets are limited to parlays – or take their wagers to offshore websites.
Fortunately, the online gambling laws in Canada don’t prevent players from accessing offshore gambling sites, and there are several highly reputable, internationally regulated choices. The new regulations in Poland aren’t so ambiguous, and could coerce local players to gaming at black-market websites, where vital protections may or may not exist.