A controversial stake tax in Germany is being challenged by a European Commission probe asking officials to elaborate on the grounds of the proposed gambling tax regime.

Unequal Market Conditions

The EC intervention comes just in time to delay the final voting of the 5.3% tax on online slots and poker stakes state governments in Germany are about to approve the upcoming new gaming regulation.

Further, it may impose time constraints on the tight summer timetable as the tax should be approved by the states by June 7, to allow enough time for the national parliament to draft the legislation with the measure and pass it into law prior to the scheduled July 1 launch for the Fourth State Treaty on Gambling.

The EC probe came in response to an EC state aid complaint filed by the online sports betting and gaming associations DSWV and DOCV against the tax, claiming it favors state-owned casino operators by imposing a differentiated tax treatment for online gaming and in essence, is no different than state aid.

The complaint from both German associations followed a similar complaint from the European Betting and Gaming Association (EGBA) which challenged the proposed tax as leading to favorable market conditions for state-run businesses.

Tax May Push Players Away

Earlier, a survey conducted by consulting and research group Goldmedia on behalf of leading gambling operators Entain, Flutter Entertainment, and the Novomatic subsidiary Greentube, revealed almost half of the online players asked would be pushed away from licensed operators and to unregulated websites by the 5.3% stake tax.

Following on the complaints, the European Commission demanded German state governments clarify how the proposed state tax differs from state aid policies prohibited by EC business legislation. As a result, the tax approval may be pushed by a year down the road due to the upcoming summer recess of state governments and the federal state elections in September.

The national parliament is adamant that the new gambling regulation will enter into force as planned, with or without the controversial stake tax, to allow businesses a degree of business certainty. Any delay for the tax will be embraced by both the DSWV and DOCV, arguing it will provide enough time for licensed stakeholders to come up with a fairer solution with regards to taxation for online betting and gaming.

First-quarter earnings reports of European-listed operators saw many of them singling out market complications in Germany, due to increased costs of operational adjustments and compliance with the upcoming new regulatory gaming regime.