By John Hughman, 14 April 2011
The regulatory worries that have dogged shares in online gambling companies over the past year deepened last week, after Germany's state governments - the Lander - revealed proposals to introduce a 16.7 per cent turnover tax on online sports betting, and limit the provision of online casino and poker to those operators holding a land-based licence.
The onerous terms of the proposed regulation look like a clear sop to state-owned casinos following the success of pro-monopoly parties in recent state elections - if the earlier example of France is any guide, it certainly won't be a tax-raising measure, as many operators will simply cease operating on the basis that they won't be able to make a reasonable return. Besides which, the Lander plan to issue only seven regional licences and halt the use of in-play betting, an increasingly important revenue stream for many online gaming operators.
The development came as particularly bad news for the newly formed
That weakness assumes a worst-case scenario of the total loss of German earnings. Analysts believe there is a strong, but not guaranteed, possibility that the Lander are likely to soften their stance before the regulation passes into law when the current Interstate gambling treaty expires at the end of this year. This proved to be the case in Spain and Greece, where initial proposals for a turnover tax were eventually watered down to a commercially viable gross profit tax. "The legislation does not appear to adhere to EU open markets law," said analyst James Hollins at broker Evolution, but he is not entirely optimistic that legal challenges could change the new law before its introduction.
Plans by the state of Schleswig-Holstein - the only one of Germany's 16 states not supporting the proposal - to instead proceed with a far more sensible 20 per cent gross profit tax offer another chink of light. Along with Bwin.Party, casino operator
IC VIEW:
It seems unlikely that Germany will really force through such onerous anti-competitive legislation, especially as it won't stop offshore providers - and possibly those in Schleswig-Holstein - selling into the country. Although the situation remains uncertain, Bwin.Party could be a useful punt on a more favourable outcome. Good value at 137p.
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