Italian Gambling Machine Operators To Bear Brunt Of New Tax

Retail gambling machine operators in Italy will bear the brunt of the new tax plan for the state, while punters avoided a proposed tax on their gambling winnings.

Thursday, the Italian government sent the European Commission its 2020 budget plan for approval. The draft sent to Brussels has undergone furious revision over the past week and includes plans to raise € 650 in the gaming industry’s new annual revenue, most of which will come from gambling machine operators in the country.

As currently written, the budget is calling for tax hikes on profits from both amusement with prizes (AWP) and video lottery terminals (VLT). The AWP tax rate will increase from 21.6% to 23% as of February 10, 2020, while the VLT rate will rise from 7.9% to 9%.

The government expects to gain a further € 268.4 million from next year’s AWP tax hike, while the VLT hike will result in an annual surcharge.

Operators with large retail operations in Italy, including Playtech through its 2018 acquisition of local retailer Snai, had warned investors in the past about the harm to the company’s annual earnings from the earlier tax hikes. Over the past month, Playtech’s shares have lost about 9% of their value as rumours circulated about the Italian government’s plan to draw a budget bullseye on the gambling industry.

The government is also proposing a range of new measures to reduce illegal gambling, including a central registry for all gambling licensees regulated by the regulatory body of Agenzia delle Dogane e dei Monopoli (ADM), as well as additional fines of up to € 1,3 m (per infringement) for local financial institutions that process payments on behalf of non-Italian licensed operators.

The government wants to use undercover agents to screen gambling operators for signs of tax evasion or those who allow access to gambling services for individuals under the age of 18.

On the plus side, the planned progressive tax on the winnings of gamblers did not make the final draft of the budget, clearly proving to be a non-starter after last week’s word leaked out. Yet rest assured, Italian-licensed operators will have to discharge their customers at least some of their new costs.

The question now becomes how much more exploitation can reasonably be expected of either players or punters by targeting the gaming industry from a government that seems to want to address all its financial problems.