Fiscal uncertainty in regulated markets – reading the mood music

The lack of balance in fiscal policy for gambling activity across Europe is particularly evident in relation to advertising policy and, of course, taxation.  The rise in anti-gambling sentiment from media outlets and certain political parties has made the gambling sector an easy target for legislative changes in these areas. These changes are expected to have a material and negative impact on operators.

For gambling advertising, most policymakers in regulated markets across the EU are striving to find the correct balance between allowing operators to market their services and protecting children and other vulnerable people from exposure to any at risk messaging.

The fact that the UK has permitted gambling advertising to be aired during live sports broadcasts for a number of years was called out as a particular threat to minors and young men aged 18-30. The Remote Gambling Association has taken what is seen by many as a big step to self-impose a whistle-to-whistle ban on gambling advertising during live sports coverage televised in the UK before 21:00. However, Italy’s blanket ban across all advertising media, including sports sponsorship, and the impending restrictions to gambling advertising in Belgium and Spain, serves as a stark reminder of just how far some governments are prepared to go.

Plenty of British politicians are in favour of regulation that brings the UK closer to Italy and it is not just banning television advertising that some advocate.  GambleAware’s commissioned research on the impact of marketing on children and other vulnerable people, as well as the Gambling Related Harm APPG’s intention to explore the wider issue of gambling-related harm in the UK are going to, no doubt, influence the direction of British advertising policy, if not resulting in legislative change, over the coming year or two.

Turning to taxation, the impending increase in remote gaming duty in the UK from 15% to 21% is rightly seen by many as the UK treasury’s solution for plugging the hole created as a result of the stake restrictions imposed on FOBTs. However, it is symptomatic of a trend across Europe which highlights that governments recognise that raising taxes on industries associated in the media with potential social harm is unlikely to raise too many eyebrows.

The Italian government is moving ahead with proposals to raise an estimate €770m from the gambling industry in 2019, as the government hikes online and land-based taxes in an attempt to balance its books. Over Christmas, the Romanian government introduced a 2 percent tax on turnover for online gambling on top of the existing tax of 16 percent on gross gaming revenue due from all gambling operators. These immediate changes were part of the Romanian government’s hunt for additional cash to prop up its costly social welfare policies. The Romanian gambling regulator has since clarified that the calculation of the recently introduced tax is based on players’ deposits and not turnover.

So how should the industry respond?

Some commentators are suggesting that operators focus more on grey market revenues, which are less susceptible to the impact of advertising and taxation initiatives but bring their own challenges. This, however, feels like a sticking plaster and, taking a long term view, the industry needs to continue apace with the recent momentum around the pro-active steps it can take to improve its image as a regulated and safe leisure pursuit (as it is for the vast majority of customers). Self-regulation around advertising and responsible gambling initiatives in the UK are a good start, but effective PR and lobbying are needed to bring this to the attention of the general public if the mood music is going to change.