Research carried out by H2 Gambling Capital has revealed the extent to which Denmark’s soon-to-come gambling tax increases could impact the regulated market.
Rates in the Scandinavian country are set to rise to 28% from the beginning of 2021, up from its current level of 20%.
The report believes that while rising taxes as high as has been proposed will initially boost revenue, that will come with various side-effects.
It’s also argued that due to a number of factors, players would abandon regulated operators and bet on offshore websites instead.
Key findings of the report
According to H2 Gambling Capital, regulated operators in Denmark have already suffered a gross gaming revenue (GGR) decline of 17% since the start of 2020. In January, Spillemyndigheden – the country’s gaming regulator – introduced mandatory deposit limits.
The research argues that if tax rises to 28%, channelsation will drop from its current online level of 88% to 76% by 2024.
Between 2021 and 2024, legalised online operator revenue would also drop significantly. It’s believed that this would go down by 25%, a loss of 4.5 billion Danish Kroner (DKK). This translates to roughly £537.512 million.
While the report opposes that this land of almost no mountains hikes up the gambling tax rate to 28%, it’s not entirely against bumping it up a little bit. H2 Gambling Capital proposes increasing it instead to 22%.
Should the above happen, the firm believes that this “would likely lead to an increase in tax revenue, while not impacting onshore channelling, thereby providing an ‘optimal’ tax rate for both consumer protection and tax generation.”
“A delicate balance to be struck”
One reason the channelisation rate may suffer is because a rise in taxes would lead to operators cutting back on how much they spend in certain areas. This could include across marketing, which might make players more prone to turning towards the black market.
H2 Gambling Capital’s research on Denmark’s gambling market was commissioned by the Danish Online Gambling Association (DOGA).
Maarten Haaijer, Secretary General of the European Betting and Gaming Association (EBGA), spoke about the report’s findings. He had the following to say.
“There is a delicate balance to be struck between taxation levels and control of the market. If taxes are too high, customers will look for more competitive websites in the offshore market. If licensed companies would cut marketing expenditure to compensate for the higher tax, these reductions would quickly be filled by offshore companies, which is detrimental to the interests of the Danish treasury, the licensed gambling companies and most importantly to the protection of the Danish consumer.
“Legislators should beware of the entirely predictable consequences of a substantial tax increase and balance their monetary priorities against the interests of the Danish consumer.”