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Gaming tax is on the rise in Italy: an additional €1.1 bn expected in 2016

by  Marco Mobili

The government is putting more pressure on the world of gaming. In 2016 the sector of legal gaming in Italy must contribute to balancing of public finances with an additional tax payment of €1.107 billion. The sector of slot machines will suffer the most with an increase from 13% to 15% in the unified state tax for new slot (AWP) and from 5% to 5.5% imposed on Videolotteries, the so-called VLTS.

This measure, according to government sources, should guarantee an overall €600 million to the Treasury. To guarantee the additional €507 million, the draft of the 2016 Stability Law focuses on renewing the contracts expiring in 2016: for 15,000 corners and shops for sports betting; for 210 licences for Bingo halls and for 120 on-line games. In addition to these cash measures, the government has added a series of actions to combat tax evasion and tax avoidance and to allow for the reopening of tax regularization until December 31, 2016 for the legalization of on-line collection centers for non-authorized betting.

The doubts of State experts

These measures do not seem to have completely convinced the technicians on the Senate Budget Committee, who have highlighted in their files possible problem areas as related to the stability of the market of gaming machines subjected to a new increase in taxes after the €500 million extraordinary one in 2015, paid only in part by the entire industry (as of October 31, €300 million was deposited by dealers and operators).

They have highlighted as well possible problems regarding new concessions for betting contracts and for bingo. Potential bidders have asked the government for a clear definition of the rules regarding territorial, municipal and regional bodies, especially concerning the opening of the halls, the hours and the distance from locations considered sensitive to gaming, such as churches, hospitals and schools.

From a strictly accounting point of view, the Senate technicians highlighted how the revenues expected from the gaming sector have a permanent nature only for the increase in the rates of taxation applied to the entertainment machines, which as mentioned should guarantee €600 million beginning in 2016. The remaining additional revenues (€507.5 million) have instead a non-structural nature.

The tax increases

The 15% increase in tax on the slot machines and the 5.5% increase on the VLTs, according to the government indications, are based on the assumption that there will be the same level of collection from 2014 and for the following years. Perhaps this figure is too optimistic and fails to take into account some important variables, starting from possible changes to local regulations that could lead to a revision of the number of machines allowed in each geographical area.

Lastly, there is a change that some operators who could opt for a delocalization could exit the Italian market. One of the main factors behind such a move is that the increase in taxation affects the entire supply chain (dealers, operators, and managers) and they are not able to pass on the cost to players.

To do so, new rules would be required that reduce the payout of the machines. Currently the law sets the winning returns for the AWP machines at a minimum of 74% of the sum played (and the market payout is set between 74% and 75%) and for the VLT machines the minimum measure is 85% (that of the market is set between 88% and 89%).