Online Gambling and Taxation
Taxation taken from online gambling affects different people in different ways depending upon the country that they live in, but how does it affect you?
Many of the countries that have legislated and regulated online gambling have since come to rely heavily upon the revenue that is generated by legal online casinos. The taxation they take from that revenue offsets some of the large deficits in other areas that have come about due to the current global economic downturn. These countries where online gambling is legal impose one form or another of gambling tax that is either taken from the gambling companies themselves, or from the individual gambler.
The way the gambling tax is levied will differ from one country to the next. Some countries levy a tax on the individual’s bets, which usually means a Spin Palace proportion of the winnings. In the United States, while online gambling is still unregulated and therefore untaxed, gambling in casinos, at the race track or on state lotteries is legal and regulated, meaning its citizens will pay tax on their winnings. Others base the tax on the calculated gross profits generated by the online casino operators, such as the UK. One way is better for the gambling companies and the other is better for the bettors. Either way there is always one guaranteed winner every time, which is the country’s government that takes the taxation.
The degree of that taxation also differs from one country to the next. In the case of those that directly tax the gambling companies on their profits, the level of taxation imposed can determine whether the gambling companies themselves are able to be competitive in the market or not. As has been recently brought to the public awareness, the level of taxation imposed in the UK and in Ireland is far higher than in other locations. This has caused some very high profile companies to consider moving their headquarters to places with lower rates of taxation such as PaddyPower in Ireland. Some, such as Ladbrokes and William Hill have already relocated from their traditional homes in the UK to Gibraltar to maintain their competitive edge in the market by paying a lower rate of tax on their profits.
In countries such as Gibraltar, Malta, Costa Rica and Antigua the tax regime s are far lower and more attractive to online gambling operators and these locations between them house more gambling companies than the rest of the world put together. Other locations, especially those with autonomous regions within countries, are looking at this situation with great interest. The Australian state of Tasmania has gone so far as to practically remove taxation altogether for gambling operators in an attempt to lure them away from their current homes, with the aim to bring jobs to the state while taking a much smaller cut of the gambling profits.
In Europe, the largest sector of the online gambling industry is represented by the UK. The country has profited greatly from their more relaxed approach to the licensing of online gambling operators, although recent tax increases have driven some companies away. Other countries in Europe are working towards newer and more innovative approaches towards the regulation and taxation of online gambling. Italy led the way by pressuring sports books and online poker sites to become licensed in order to legally operate in the country, for which it boosted its revenues significantly from the resultant taxation.
When you cross the Atlantic there is a different aspect to this altogether. It is well known that by their lack of regulation and legislation, the United States treasury is being deprived of an enormous tax windfall that is being funneled off to other countries where online gambling is legal and companies are able to base their activities under license. In stark contrast, land based gambling in casinos and at sporting events such as horse racing are perfectly legal and the winnings are taxed, although not directly. Each person who gambles and wins is required to declare their gambling winnings on their annual tax returns and a percentage of that will be added to their overall tax bill. Interestingly, American gamblers are not, conversely, required to declare gambling losses in order to qualify for a tax rebate!
North of the border in Canada, where the legality of online gambling is not well defined in some provinces but legal in others, the winnings from all forms of gambling is tax free. In China the question of online gambling taxes are a moot point as this is now an outlawed activity punishable by imprisonment.
The question of whether you are able to gamble online and if you will be taxed on your winnings or not, is dependent on where you choose to gamble. This is usually down to where you live and it can be a good thing or not, depending upon your viewpoint and that of the government of your chosen country of residence.