After introducing the new gambling taxation policy, the recently formed Italian government enters into 2019 by implementing this law. Those restrictions include an absolute ban on gambling advertising and tax increases for some kinds of gambling activities.

The most heavily affected participants of the market are online casino operators available in Italy. The tax hike for them comprised 5% and accounts for 25% of the income. Online betting websites suffered a bit less, experiencing a tax increase of 2%. Online fixed-odds betting tax comprises 24% for now.

In 2017, the Italian online gambling market was the 2nd largest in Europe, only being behind the UK. However, more recent numbers provided by the Agenzia delle Dogane e dei Monopoli (ADM) clearly show us that the pace of market growth has drastically slowed down since the announcement of the new regulations.

Will the tax hike be able to lower Italy’s positions in the gambling sector? How will it affect Italian gamblers and their capabilities? Those are the questions we are going to answer in this article.


The Background to Tax Hike and Gambling Ban


The Italian gambling industry would continue to prosper unless the change of power occurred. During the last election, Italian populist leader Luigi di Maio became the Deputy Prime Minister of Italy. The politician is known for his serious commitment to the country’s growth and eagerness to take radical measures in order to bring his intentions to life.

“We are ready to make major cuts on wasteful spending,” — said di Maio during one of his interviews. New gambling policy is considered one of such measures, being introduced in the law called Dignity Decree. The regulation mostly touches employment issues like fixed-term contracts, enterprise relocation, and job security, but is not limited to them.

Di Maio believes that new policies will improve social stability by solving the problem gambling issue. It seems to be a relevant decision, as the number of problem gamblers has quadrupled since the last decade. Actually, it rose from 100,000 people in 2007 to nearly 400,000 in 2017 as reported in this study.

To tackle addiction, the government prohibited gambling advertising across all marketing channels including TV, print media, the internet, and gambling football sponsorships. If any company breaks the law, it will pay at least €50,000 as a fine.

Football officials argued against the legislation, as Italian clubs currently receive €120 million from their gambling and betting sponsors per year. Because of this, the regulations might cause a major disadvantage to Italian clubs and their budgets.

Aside from online gambling and betting taxes, the new legislation implies a 2% tax increase for land-based sports betting companies alongside with virtual sports. The companies from those sectors will contribute 20% and 22% of their gross gaming revenues (GGR) to the Italian budget.

The last affected category of gambling activities is amusement with prizes machines and video lottery terminals. The tax for AWPs and VLTs grew by 1.35% and 1.25% respectively. Moreover, the new law cuts payout rates down to 68% and 84%.


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The Policy’s Effects on the Italian Gambling Businesses


According to the officials, the new regulations will result in €80M of combined revenue coming from online gambling and betting taxes. It seems to be a win-win for the country’s coffer and a lose-lose for all gambling companies, but is this in fact the case?

One of the hugest gambling companies, Playtech, has already predicted €20-25 million of possible revenue loss in 2019 if they don’t take any actions to mitigate the tax hike. The same fate awaits other global operators with a major presence on the Italian market.

Speaking of the local Italian businesses, some of them are not going to survive in such harsh conditions. The blanket ban on gambling advertising means the inability of those companies to attract new clients otherwise than through the grapevine.

The representatives of Leo Vegas online casino indicated that there is only one unambiguous winner in this situation: the black market. While fair operators will obey the regulations and therefore experience a decline in their economic performance, shadow companies won’t hesitate and get around the new law, luring more and more Italian gamblers into their treacherous nets.


Possible Consequences for Italian Casino Players


Existing casino players won’t be happy with decreased payouts of the land-based slot machines, yet they’re still allowed to gamble in both online and brick-and-mortar venues. Local online gamblers will likely rely on the international casino operators that still provide services to Italian residents.

It’s quite logical to assume that the number of fresh gamblers might decrease within a couple of years. However, nothing really stops problem gamblers we already had before 2019 to keep losing their money to the unlicensed websites.


Conclusion


All in all, the new gambling regulations are a drastic move which could have been made in vain. It has some chances to prevent new cases of gambling addiction but is unlikely to benefit income to the budget that much.

With the ban on advertising, Italian online casinos will have to struggle in order to survive, let alone achieving any growth. And if gambling operators experience an extreme reduction in their profits, the tax they pay to the government will be relatively smaller.

In this case, the 5% change won’t help to increase the Italian budget and will only disrupt the capital flow from the gambling sector.