The European Gaming and Betting Association has warned that proposals to increase Danish online gambling taxes by 40 per cent could lead to an exodus of players to the offshore market.
Analysis from H2 Gambling Capital has found that the Danish government’s proposed tax increases for online gambling will reduce the country’s licensed market by 25 per cent.
The examination found that the proposals to increase taxes from its current standing of 20 per cent to 28 per cent on gross gaming revenue in 2021 would lead to a very small initial increase in state tax revenues, but these tax gains will be depleted as growth in the licensed market is dwarfed by growth in the offshore market. H2 concludes that the tax increases would lead to an 80 per cent increase in Denmark’s offshore gambling market.
It was suggested that the exit of consumers would occur because the additional tax burdens for licensed companies will force them to make cost reductions, including less marketing, which will lead to customers being more susceptible to the those activities of offshore counterparts.
“There is a delicate balance to be struck between taxation levels and control of the market. If taxes are too high, customers will look for more competitive websites in the offshore market,” explained Maarten Haijer, secretary general of the EGBA.
“If licensed companies would cut marketing expenditure to compensate for the higher tax, these reductions would quickly be filled by offshore companies, which is detrimental to the interests of the Danish treasury, the licensed gambling companies and most importantly to the protection of the Danish consumer.
“Legislators should beware of the entirely predictable consequences of a substantial tax increase and balance their monetary priorities against the interests of the Danish consumer.”
The analysis found that during the current year 16 per cent of Denmark’s online gambling activity takes place on offshore websites, but that this would increase to 24 per cent if the new tax measures are adopted.
As well as a depletion of taxes, a heightened offshore uptake would also jeopardise Danish consumer protection as the country’s laws and safeguards for gamblers, including the country’s self-exclusion register ROFUS, would not apply.
Instead, H2 Gambling Capital concludes that if the government wants to increase tax revenues, a 10 per cent increase to the current tax rate, to 22 per cent of gross gaming revenue, would be optimal – as it would increase tax revenues for the state while not encouraging offshore activity.