German online slot machine tax could have implications for UK casinos

by Karina Chen Last Updated
German Government Building Image

Online casinos in Germany are set to be affected if a proposed 8% tax on slot machine play comes into law as the country prepares to ratify regulated market rules in the summer of 2021.

The German government is drawing up regulations ahead of the opening up of online casinos in the country – with a tax on slots turnover being considered among other initiatives.

Lawmakers in Hesse, North Rhine-Westphalia, Bavaria, and Berlin have written up the draft legislation, which includes a 5.3% tax on online poker. Yet there is concern these taxes could have implications on bettors, with the likelihood being that jackpots for the most attractive slot machines will be reduced.

Germany is already set to have one of the most heavily-regulated online gambling industries when the Glüneurstv law comes into effect in July 2021. Gambling operators must agree to a new regulating authority, while individual states have to pass the legislation before casinos and sports books can launch in each area.

Firms were already able to offer heavily-restricted forms of sport and casino gambling during a ‘transition period’ in 2020. Those restrictions included:

  • €1 per spin max bet 
  • No auto-play functions
  • Five-second intervals between slots spins
  • Limits on in-play sports betting
  • €1,000 monthly spending cap
  • Online casino and poker currently only available in Schleswig-Holstein
  • Advertising casino products prohibited
  • 5.3% tax on online poker

The Süddeutsche Zeitung newspaper reports that the slots tax – which would earn the German government eight cents for every €1 bet on an online machine – could provide billions of euros in revenue. There is also a hope the tax would help “contributing to the “drying out” of illegal gaming operations”.

However, others are warning of the implications of taxing gambling in this manner. Concerns have been raised that taxing slots will directly reduce jackpot and general payout sizes, which make regulated slot machines less attractive to consumers. There is a concern this could push players onto the unregulated market, where customer security is at risk and the government doesn’t earn a cent in tax revenue.

“With taxes of this amount on their stakes, the fear is customers would continue to migrate to illegal providers without a license in Germany,” said German Online Casino Association president Dirk Quermann.

“The plans of the working group inevitably lead to the failure to meet the objectives of the new state treaty on gambling.”

UK looking into online gambling

Individual German states are yet to vote on the regulations, but the proposals are likely to have been noticed by the UK Gambling Commission (GC), which is currently conducting a review into the industry in order to update the 2005 Gambling Act.

One of the core questions the GC is seeking to answer is where there is “evidence from other jurisdictions or regulators on the most effective system for recouping the regulatory and societal costs of gambling from operators, for instance through taxes, licence fees or statutory levies”.

Yet Germany can also learn from the UK too. When online gambling became popular at the start of the millennium, a 15% point of supply tax on bookmakers’ gross profit replaced the betting levy. However, because the tax was on point of supply, rather than consumption, UK betting companies moved their operations offshore to countries such as Malta. Only in 2014 did the UK correct the legislation so taxes were sourced within the country.=

The UK currently has a system where remote gaming operators pay 21% tax on their profits. The industry generates around £5.5bn from remote gambling each year – a figure that is expected to rise in the near future.

Back to top