Changes to the Italian gambling tax regime are becoming as much a part of the New Year celebrations as champagne and fireworks. But operators in Italy will not be welcoming in 2019 because the tax increases introduced will cost them tens of millions of Euros. Italy, however, is not alone amongst the key European gambling markets where licence holders could face more testing conditions this year.

Two of the key gambling tax increases see the rate of online gaming tax rise by five percentage points to 25% and the online sports betting tax go up by two percentage points to 24%. In 2018 Playtech took a large bet on the Italian market with the acquisition of Snaitech.  But Playtech has calculated that the new taxes will reduce its adjusted EBITDA “by approximately EUR 20 to EUR 25 million” before it undertakes any attempts to mitigate the tax rises. Of course, these tax changes come on top of the ban on advertising and sponsorship for gambling in Italy, which was announced last year.

The UK e-gaming sector is plotting a similar course to its Italian counterpart in 2019. Late in 2018 a voluntary “whistle to whistle” ban on pre-watershed television gambling advert during live sports was agreed by the UK’s gambling companies. The Industry Group for Responsible Gambling (IGRG) will amend its advertising code in the new year and the ban will come into force in the summer of 2019. Unlike in Italy the gambling sector is attempting the self-regulation of gambling adverts. The intention is to stave off a government-mandated total ban on gambling advertising, like that imposed in Italy. The UK’s remote gaming duty is also due to increase by six percentage points to 21% in April 2019, as part of measures to mitigate the loss of tax revenues from fixed-odds betting terminals.

Between them, Italy and the UK account for 41% of the entire European e-gaming market. For some individual operators they are even more crucial markets to their source of revenues and profits. 2019 will place even greater regulatory, taxation and compliance pressures on those profits. This pressure has already been reflected in the share prices of the listed gambling companies. 888 Holdings’ share price has fallen by almost 40% in 2018; Paddy Power Betfair by 27%; and GVC Holdings by 26%.

Europe’s operators, therefore, would be forgiven for turning their attention westwards to the “new world” in 2019 as they seek to grow their businesses.

The repealing of the ban on sports betting in the US in May 2018 was a real boost for the sector and the European brands have been jostling for position and partners. 2019 will see a continuation of the individual states’ deliberations as to their sports betting regulation. GBGC forecasts that the US sports betting sector will generate almost US$ 1 billion in revenues in 2019, based on the current states which have implemented regulation. This figure could rise to almost US$ 2 billion by 2022. If more states get involved, so the opportunity increases. But the concern in some states is that they see sports betting as an easy source of tax revenues and set the tax rates accordingly. This attitude limits both the ability of licence holders to earn profits and for the states to fulfil the potential of their legal betting markets.

In both Brazil and Argentina the final months of 2018 did bring some good news for the gambling sector to take into 2019. Brazil’s outgoing president finally signed legislation that allows for the introduction of fixed-odds sports betting, both online and retail. It is not clear what the market will look like – monopoly or competitive – but after years of delays in signing other, more extensive gambling legislation, it is a step in the right direction.

The key province of Buenos Aires in Argentina also introduced budgetary legislation that would enable online gambling in the province. With a proposed tax rate of 15% (plus 2% administration payment) and a restriction of seven licences for a population of almost 17 million people, it could develop in to a good market for those operators that secure a licence.

Globally, GBGC estimates that total global gambling revenues will increase to US$ 468 billion in 2019. Within that total, the global e-gaming sector will also rise in 2019, surpassing US$ 50 billion in revenues, and accounting for almost 11% of all gambling. The ever-increasing amount of e-gaming revenues earned under local licences continues its trend in 2019, with some 57% of e-gaming revenues being earned under a local licence. This trend is helped in 2019 by the new licensing regimes in Sweden and the Netherlands. 
But, as has been highlighted above, a consequence of regulation is that gambling operators will be relinquishing a higher proportion of those revenues to governments and regulators in the form of tax and compliance costs.