When the European Union (EU) was being created, the 1957 Treaty of Rome outlined four fundamental freedoms that would be required of all member states. Alongside, goods, capital, and people, services were identified as one of the four freedoms. Throughout the EU, however, there is a lack of consistency in enforcing those freedoms, especially in the online gambling industry.
Portugal is a prime example of a member state that has not observed the freedom of movement of services for online gambling. Thus far, the only gambling operator has been Santa Casa de la Misericordia, but that will change later in 2015. Discussions between Portugal’s Council of Ministers has led to the drafting of online gambling legislation that will permit the market entry of new operators, either domestically or from other countries.
Millions in Tax Revenue Expected
At some stage during March 2015, it is expected that Portugal president Aníbal António Cavaco Silva will add his signature to the legislation, thereby verifying its legality for the future. As for what inspired the strategy, Portugal is seeking to generate approximately £18 million in annual taxation from operators. However, analyst PwC estimates that the annual figure could be as low as £7 million over the first three years.
Operators considering entry to the Portugal online gambling market will have to part with a sizeable deposit worth €500,000 [£350,000] just to start the application process. Portugal gambling licenses will not be considered without the deposit. The process will be curated by Turismo de Portugal, which is expected to grant the first wave of licenses in the third quarter of 2015. However, it might be later if Turismo de Portugal is slow to implement its address its administrative requirements.
Although some operators will be eager to enter the new market, they will first have to consider the tax implications. Notably, the rates of taxations can get quite high. At the lower end of the scale, sports betting income will be taxed at rate of 8-16%. Meanwhile, online casino and poker will start off with a base rate of 15%. However, that will be increased by 3% for every €1 million [£730,000] earned €5 million [£3.6 million]. The maximum rate can be as high as 30%.
The Player Implications
First and foremost, it must be highlighted that Portuguese players will not have to pay any tax on their winnings. From that standpoint, the news of the Portuguese market opening is highly positive. A less positive aspect, though, is that players might have to endure uncompetitive deals and offers from their favourite operators. The increasing rate of tax means that smaller operators might struggle to come up with competitive offers.
The final concern is that high taxation could dissuade some quality operators from entering, which would deprive Portuguese residents of choice. However, this could prevent low-quality entrants, so it might turn out that the Portuguese market attains an incredibly high standard. Either way, many players will be pleased to see an end to the state monopoly and extension of their freedoms.
Related: Could William Hill Buy 888 in 2015? Click full details here.