Dutch Politicians Continue to Debate Internet Gambling Taxes

18 May 2015

Lawmakers in most countries are really good at two things: raising taxes and talking a lot. Heavy doses of both are underway right now as Dutch lawmakers debate the specifics of tax rates for the upcoming licensed online gambling that will be underway for the Remote Gaming Act. The major point of contention is that the original rate of 20 percent that was suggested is lower than the 29 percent rate that's paid by land-based establishments. According to politician logic, it's only fair to raise taxes for future online gambling.

They've really started looking at this in detail only recently since here has been so much interest in operators getting a Dutch license. It's reported that over 200 different companies have inquired about licensing or been in contact about what licensing would entail, and this has prompted lawmakers to make sure they can squeeze every last penny from the industry. Mind you that this is an industry that hasn't even launched yet because the licensing process called for in the Remote Gaming Act hasn't went into effect just yet.

There's a big trap that Dutch lawmakers are dangerously close to falling for, and it has to do with raising taxes to levels that are too high. When taxes go up for online gambling site operators, the value that players get goes down. When the value goes down for the players, the sites themselves become less competitive relative to foreign operators that do not have a license. In short, higher taxes leads to direct incentives for players to ditch licensed sites and go with unlicensed alternatives. And when players don't want to play with the licensed sites, tax revenues go down tremendously.

A similar case is happening right now in Canada where players are being given major incentives to play with foreign, unlicensed sites. The reason for these incentives are different, but the end result is that the licensed, government-operated online gambling portals have only managed to pick up a very small percentage of the market. If Dutch lawmakers aren't careful with what they decide for the tax levels, many operators will lose interest, and the ones that were interested will have to make up the difference by providing players with a lower amount of value.