France’s budget package for 2020 includes major changes to the way gambling taxes are determined. The new law, which is currently making its way to the National Assembly for approval, departs from the previous model that was based on turnover. French bookmakers and gamblers might anticipate significant effects from the reforms.
Taxing Total Gambling Winnings
The GGR (Gross Gaming Revenue) of casinos will be subject to taxation rather than their overall revenue. The net gain before payouts is known as the GGR. Sports betting and online poker both increase from their previous rates of 33.8% and 36.1% to 19.9% GGR tariff, while the tax rate on horse racing rises from 13.2% to 19.9%.
Improved Community Benefit
The new budget measure shifts the foundation of social security payments from payroll to revenue. The increased taxes on Gross Gaming Revenue are higher at 6.8%, 10.7%, and 4.1% for horse racing, sports betting, and online Poker, respectively, because the amounts being taxed are expected to be lower.
Any surplus from sports betting is donated to the National Centre for the Development of Sport, as is the case with all social security contributions. While 1.8% of the tax revenue from sports betting and horse racing was sent to charity under the old system, only 0.2% of online Poker’s tax revenue was.
Total Taxes in 2020
Retailers will now be subject to taxes of 40.8% on online Poker, 37.7% on horse racing, 44.5% on retail sports betting, and 55.2% on internet sports wagers thanks to the introduction of additional taxes and the inclusion of social security tariffs.
The new bill was motivated by the desire to allow the state and operators to adjust their tax contributions and receipts based on the outcomes of gambles. Turnover-based systems have been criticized in the past by the Senate and the French online regulator ARJEL (Autorité de Régulation des Jeux en Ligne), who claimed that they stifled competition by placing an undue burden on casinos and sportsbooks.
The French Court of Auditors acknowledged, in its October 2016 report reviewing the regulation of gaming, that French levies is particularly high due to the technique as well as the amounts of taxation. It is widely agreed that this would place an undue burden on gambling establishments and bookies, preventing the emergence of a level playing field.
Updated Financial Forecasts
France’s gambling industry is booming, especially sports betting, which saw its revenue increase by 9 percent, to €1.08 billion, in the third quarter of 2019. GGR increased by 44% to €214m within the same time period.
The government anticipates collecting €586 million in GGR taxes from sports betting, €787 million from casinos, and €66 million from online Poker after the new taxes are fully implemented. These funds are in addition to the €2.4 billion that the newly privatized national lottery La Française des Jeux is anticipated to pay.
Changes in Taxation
The new rules are expected to increase donations to charitable organizations, which is a welcome development. Since operators would no longer be taxed based on their total revenue, they may increase their profits at the expense of gamblers by charging them more for their losses.
If the changes generate the anticipated higher earnings and economic stimulus, they could herald a significant new trend for the rest of the industry across the European Union. The success of the changes can only be gauged over time, therefore all governments will be keeping a close eye on France in the coming months.