The potential increase of the gaming taxes for Italian land based videolottery and AWPs raised major concerns among operators and investors, but the real effects of such increase shall be reviewed in the long term together with the further measures expected to be adopted by the Government.
The potential gaming tax change
As part of the budget law that is usually approved by the Italian Parliament in the last days of the year,
- the gaming duties for videolottery should be raised from 5% to 9% of the turnover with a reduction of the minimum payout from 85% to 81% while
- those applicable to AWPs should be increased from 13% to 17% of the turnover with a reduction of the minimum payout from 74% to 70%.
The consequences of the change
The effect of such change on revenues generated by gaming operators is very uncertain.
No major negative effects are expected for AWPs that are not played by gamblers, but by people who like spending their change in a gaming machine. On the contrary, the effects of the change on the videolottery market are the highest concern.
AWP and VLTs represent 90% of the revenues for some Italian licensees and the risk is that in the medium/long term a reduction in entries will be occur. But the real effects of such change have to be reviewed together with the additional measures prescribed by the draft budget law increasing fines against the so called CTDs.
CTDs are Internet cafés operated as betting shops under a foreign gaming license without paying any Italian gaming tax and without being subject to any check by authorities or territorial restriction. According to unofficial data, CTDs are over 5,000 in Italy while licensed betting shops are 9,000.
If the measures against CTDs are adopted and enforced, an additional flow of players might be channeled to licensed betting shops that are the same running AWP and VLTs increasing their revenues. At the same time, if checks on illegal gaming halls will be increased, players will be forced to gamble in the licensed environment that might potentially balance the potential loss due to the increase of the gaming tax rate.
And in fact, operators in the market are mostly concerned that such tax increase will fuel the illegal gaming market where games with a much higher payout will be available. Therefore, the result of this change shall be assessed on the basis of the enforcement measures that will be put in place by Italian authorities against the illegal offering of games.
Timing and likelihood of the change
The timing of this potential change (if approved) is still a question mark. The current draft provides for its coming into force in April 2015, but the change of the payout for the machines will require a recertification of all the machines by the competent authority that in my view might take over a year.
Also, the gaming sector is one of the most contentious sectors in Italy and therefore it is very likely that potential disputes will arise will a further delay that cannot be calculated at the moment.
Finally, it should be considered that the Italian accounting court does NOT expect major tax entries from this change and therefore the big question is why this change shall be adopted if it is not going to be beneficial to anyone?
I will update you on the developments of the matter but in the meantime as usual feel free to contact me Giulio Coraggio to discuss. Also, if you want to receive my newsletter, please join my LinkedIn Group or my Facebook page. And follow me on Twitter, Google+ and become one of my friends on LinkedIn.