EGBA warns Danish tax hikes could boost offshore market

The European Gaming and Betting Association (EGBA) has emphasised that there needs to be a ‘delicate balance’ between taxation levels and market regulations as new proposals made by the Danish government could result in declining channelisation rates aiding the black market.

The Danish government has submitted proposals to increase taxes from 20% of gross gaming revenue to 28% by 2021. However, analysis from H2 Gambling Capital has found that the proposed tax increases will reduce the country’s licensed market by 25%.

“There is a delicate balance to be struck between taxation levels and control of the market. If taxes are too high, customers will look for more competitive websites in the offshore market,” explained Maarten Haijer, secretary general of the EGBA.

“If licensed companies would cut marketing expenditure to compensate for the higher tax, these reductions would quickly be filled by offshore companies, which is detrimental to the interests of the Danish treasury, the licensed gambling companies and most importantly to the protection of the Danish consumer.

“Legislators should beware of the entirely predictable consequences of a substantial tax increase and balance their monetary priorities against the interests of the Danish consumer.”

The analysis has shown that the 40% increase in taxes would lead to a marginal initial increase in state tax revenues, with a subsequent decrease as growth in the licensed market is dwarfed by growth in the offshore market.

H2 suggested that the tax increases would result in an 80% growth in Denmark’s offshore gambling market.

Currently, 16% of all online gambling activity in Denmark takes place via offshore websites, however, the tax increases would increase this to 24%.

H2 analysis highlighted that the additional tax burdens for licenced companies would result in a number of cost reductions, including less marketing, which will lead to customers being more susceptible to the activities of offshore sites.

Instead, H2 Gambling Capital proposed a 10% increase to the current tax rate. An increase from 20% to 22% would allow the state to receive increased tax revenues, while also minimising the uptake in offshore activity.