Poland’s new gambling law came into effect on Saturday, April 1, 2017. And although its original idea was for the country to introduce a regulatory regime that complied with contemporary demand and the overall iGaming environment in Europe, things actually went a bit wrong.
The online gambling community witnessed in the months and weeks before the new law’s implementation what it tends to call a massive exodus of operators from the Polish gambling market. Big industry players such as William Hill and bet365 bid the country and local players farewell, even though the new regulatory regime would have made it possible for them to operate in a regulated environment.
On the whole, Poland’s new gambling law is not that much different from regulations in other jurisdictions. However, it contains one particular provision that makes the market not particularly friendly to operators – the provision concerned with how iGaming operations are to be taxed from now on in the country.
Under the new regulations, licensed operators will pay a 12% tax (which could have been a reasonable rate) on turnover (which many believe is not reasonable at all). Here it is important to note that regulated jurisdictions mostly use gross revenue as a tax base.
As it had been expected, the heavy tax urged operators away from the newly regulated Polish market. And the introduction of heavy taxes usually does not bode well for regulated iGaming markets, despite the huge potential they may have.
The obvious reason is that no business enterprise likes being burdened with impossible taxes. However, within the context of the online gambling industry, there are several important factors that contribute to operators’ decision to leave a newly regulated market, instead of opting for the benefits of running regulated operations.
In the first place, many iGaming operators do not have physical presence in one market on another. The thing is that operators with both land-based and online operations have more channels to attract players and have the chance to profit better from those channels. What is more, brick-and-mortar and digital products are usually taxed differently, so one reasonable tax rate may offset the negative effects arising from the other.
Another important thing to take into account is the fact that players could also suffer from burdensome online gambling taxes. If operators decide to stay in a tax-heavy jurisdiction, they will start to look for ways to stay afloat. And they may decide that cutting player promotions may be one such way.
Less lucrative promotions send players to land-based venues, which is not a terrible option. However, players may opt for unregulated iGaming offering provided by black market operators, which is a terrible option.
Regulation, taxation included, is part of the future of the online gambling industry. However, if lawmakers systematically fail to find the right balance between effective regulations and ones that are too stringent, the industry may not be bound to the prosperity many hope for.
