RGA challenges new online gambling taxation proposals in Greek Courts

The Remote Gambling Association (RGA), the largest trade association for remote gambling operators in the world, has submitted a legal challenge to the Greek Government's taxation regime for remote gambling. The action in the Greek Council of State was co-signed by bet365, Betfair and William Hill.

The new tax regime will require licensed gambling operators who have been active in the Greek market to pay taxes retrospectively on any revenues earned from Greece-based customers from 1 January 2010 until the new licences have been awarded. In addition licensed gambling operators will be required to pay a retrospective 10% withholding tax (WHT) on winnings for the year up to 16 December 2011. This provision is equivalent to a market entry fee that will have to be paid by all of the operators who have until now been unable to obtain a licence to operate in Greece.

The RGA's action seeks an annulment of the Ministerial Decision to introduce retrospective gross gambling revenue tax and a tax on customers' winnings. The action is founded on the grounds that the proposed taxation measures are unconstitutional as they contravene the right to conduct a business activity and are disproportionate. Furthermore, the proposals do not accord with the principle that international treaties supersede conflicting provisions of Greek law.

The proposal of what are unconstitutional and non EU-conforming tax obligations on remote operators came at the same time as the Greek Government granting OPAP, the incumbent monopoly gambling operator for offline games, an extension of its existing licence for an additional 10 years. This extension, for the period from 2020 to 2030, was granted in a wholly uncompetitive and non-transparent fashion. Furthermore, OPAP currently pays no gambling tax on its offline activities, whereas online operators will be required to pay 30% GGR, and its customers are not subjected to a 10% withholding tax (on winnings under €100).

In October and November 2011 the RGA filed two separate complaints with the European Commission regarding the recently adopted Greek online gambling law – one on its own on the grounds of State Aid, and the other one jointly with the EGBA on internal market grounds. The complaints detail a range of non-EU compliant barriers to new market entrants and request that the Commission, as guardian of the EU Treaties, addresses these discrepancies as a matter of urgency.

The RGA will continue to lobby the Greek Government, on the basis that its actions are not in line with fundamental EU law and Greek domestic laws. Crucially, implantation of the proposed taxation regime and other anti-competitive conditions within the new online gambling legislation will ensure that potential market entrants will be driven out of the Greek market. This will in turn see the potential tax take of the Greek government shrink, while at the same time Greek consumers will be encouraged to bet outside of what will be an uncompetitive and unviable market.

Clive Hawkswood, CEO of the Remote Gambling Association said:

"The RGA believes that the opening of the Greek on-line gambling market is a welcome step. However, the taxation regime proposed will create a huge and uncompetitive financial burden for potential licensees. There is no doubt that implementation of current proposals will see the newly regulated market fail to the detriment of the Greek government and Greek consumers. There is still time to amend the Ministerial Decision and for the tax rates to be reviewed and I hope the Ministry of Finance will be willing to discuss viable alternatives with us.

"At the same time, we await the European Commission's response to the two complaints filed so far, and we urge them to ensure that fundamental EU market principles are upheld in Greece."

Remote Gambling Association (RGA)

For more information, contact:
Sue Rossiter, Director of Projects and Policy (+44 (0)20 7831 2195 or srossiter@rga.eu.com.)

EGBA: European Court calls into question the compliance of the new Italian regulation

Gambling: European Court calls into question the compliance of the new Italian regulation. EU law precludes national legislation designed to protect the market position of incumbents.

CJEU confirms fundamental ‘red line’ for regulated gambling markets and the obligation to ensure full transparency, legal certainty and equal treatment.

Today the European Court of Justice (CJEU) issued its preliminary ruling in the joint cases Costa and Cifone regarding the access of European operators to Italian gambling licences (cases C-72/10 and C-77/10) under the 2006 reformed Italian gambling legislation. The CJEU confirms that Member States cannot protect vested economic interests and thereby discriminate against new operators under the aegis of consumer protection or fraud prevention.

In particular, the Court ruled:

• That a national restriction is justifiable only if it does “not have as a true objective the protection of the market positions of the existing operators” – Para. 65

• “The very fact that the existing operators have been able to start up several years earlier than the operators unlawfully excluded ,[…] confers on them an unfair competitive advantage [which] [...] constitutes a new breach of Articles 43 EC and 49 EC and of the principle of equal treatment.” – Para 53.

• As regards possible justifications for unequal treatment "the objective of ensuring continuity, financial stability or a proper return on past investments for operators […] cannot be accepted as overriding reasons in the public interest" – Para 59.

• The Court rejects the justification by the objectives of reducing gaming opportunities and combating criminality, when a Member State "has long been marked by a policy of expanding activity with the aim of increasing tax revenue" – Para 62.

• The Court also points out that national measures intending to achieve such objectives must be proportional, consistent and systematic – Para 63. This is not the case if national measures, for example "rules on minimum distances were imposed exclusively on new licence holders and not on those already established" – Para 64.

• “In order to enable any potential tenderer to assess with certainty the likelihood that such penalties will be applied to it, to preclude any risk of favouritism or arbitrariness on the part of the licensing authority […] it is therefore necessary [… to set out the circumstances for the withdrawal of licenses] in a clear, precise and unequivocal manner” – Para. 78

• The Court further repeats its consistent case law that no penalties may be imposed on operators having been excluded from obtaining a license in breach of EU law – Para. 85.

In its ruling, the Court notes that the Italian legislation, in the manner in which it regulates the gambling market, is not consistent with the claimed objectives of protecting consumers from gambling addiction and limiting gambling activity in Italy. The Court points out that the aim of the Italian legislation is to protect incumbents and increase tax revenues. Such objectives cannot serve to justify violations of EU law. This ruling is in line with a series of recent rulings in which the Court focusses on the lack of consistency between the claimed objectives of Member States and the actual legislation that in fact aims to protect incumbents' interests.

Sigrid Ligné, Secretary General of the EGBA commented on today’s ruling: “This very positive ruling confirms that national legislation that opens up and regulates the gambling market may not discriminate against new operators but must guarantee fair market access.”

Ligné adds: “The Court has made particularly clear the ‘red lines’ that Member States must observe when they regulate gambling; it is high time for the European Commission to enforce the consistent case law of the CJEU and pursue complaints and infringements procedures accordingly ”