German-targeted online casino operators will be forced to comply with a turnover tax of 5.3% after the Bundestag Finance Committee approved the passage of a bill introducing the tax on a full vote in Parliament.
The bill amends the German Race and Lottery Act to include a 5.3% turnover tax that applies to online casinos, virtual slots and online poker.
Once approved, the bill will go to the formal legislative process, which includes a second and third parliamentary reading, scheduled for later this month.
Antje Tillman, a spokesman for the ruling CDU/CSU party, hailed the introduction of the tax as a necessary step towards legalizing the online casino vertical, which was previously illegal in Germany.
“Uniform tax rules are the basis for legalization,” Tillman explained.
“With today's law, we have adopted a German-wide ordinance on the taxation of online gambling such as virtual slot machines and online poker.
“This means online gambling is taxed at 5.3% on bets placed. Even if this gambling is illegal, for example, due to the lack of a license, taxation takes place.
“With this legislative decree, the goals of the State Gambling Treaty are realized.
“On the one hand, the Racing Betting and Lottery Act serves to legitimize previously illegal gambling offers. On the other hand, it fights against gambling addiction and other negative phenomena in real and virtual games,” concluded Tillman.
This view, however, is not shared by the European Gambling and Betting Association (EGBA), which said in May that the introduction of the tax could reduce the sewerage of German online casinos to 51%.
Criticizing what it called "punitive and unfair" tax proposals, the EGBA suggested that the tax would result in online operators being taxed at rates four to five times higher than their land-based counterparts and competitors.
This increases 15 times for online slot operators compared to retail ones.
Earlier this month, the EGBA filed a formal complaint with the European Commission (EC) over the tax on the grounds that it violates EU state aid rules.
Under EU rules, it is illegal for Member States to provide financial assistance to some companies and not others in a manner that violates fair competition.
If the European Commission considers that the rules have been violated, it has the option to initiate a "damage case" to remove the undue advantage given to the company (or companies) and restore the market to its state before the above-mentioned assistance was granted.
The statute of limitations is 10 years.
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