By Richard van Schaik and Róbin de Wit
Today, the long-awaited answers of the Dutch State Secretary for Security and Justice, mr. Dijkhoff, to the second round of questions regarding the upcoming Dutch Remote Gaming Act (“RGA”) were published.
In this memorandum of reply, Dijkhoff provides answers to several topics related to the RGA bill. Among these topics, the proposed differentiated tax rates applicable to remote and land based gaming operators is addressed.
Recap: proposed tax regime under RGA
Under the RGA, a tax rate of 20% has been proposed for legal remote games of chance. For land based gaming, the tax rate will continue to be 29%. According to the Dutch government, this lower tax rate for remote operators must further strengthen their position and must contribute to achieve the highest degree of channeling as possible. Increasing the rate for remote gaming will have large negative consequences for the desired channeling degree (80%), now that this will increase the risk that Dutch players massively turn to (more attractive) illegal sites.
Resistance differentiated regime; parliamentary questions posed
Although a 20% tax rate is considered suitable for remote operators, there have been calls to bring this rate to the same level at the tax rate applicable to land based operators in order to avoid improper competition. Also, there have been voices to amend the future tax rate to 24% or 25% for both online as well as land based operators. Furthermore, the relationship between the differentiated tax rates and achieving the envisaged channeling degree was doubted.
Further to this resistance, members of the parliament posed tax related parliamentary questions in May 2015. Please read our earlier blog in this respect here.
Reponse Dijkhoff: insisting on proposed regime
In summary, Dijkhoff’s answers show his persistence with respect to the proposed differentiated tax regime for remote and land based gaming. His reasoning is based on the fact that future remote gaming licensees have to compete with illegal operators that do not pay gaming taxes. Research results show that there is a direct connection between the costs operators have to incur and the degree of channeling. Also, practice from other EU countries shows that a tax rate of 20% is the upper limit to achieve the channeling objectives set by the Dutch government. Hence, Dijkhoff considers a differentiated rate necessary to keep costs for future legal remote gaming operators to the minimum, so that in the short term a substantial degree of channeling can be achieved.
Furthermore, Dijkhoff holds the opinion that lowering the tax rate for land based operators is not an option. Even if the tax rate for land based gaming operators is reduced by 1% (to 28%), great budgeted losses will be suffered by the state treasury.
This long-awaited memorandum of reply is the next step in the legislative process of the RGA. It is now up to the Dutch parliament to hold plenary debates on the substance of the bill. It is expected that the RGA will enter into effect in 2017.