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Online gambling is legal in Portugal, but despite this, there is still a large amount of traffic going to unregulated online casino sites. The reason as one organization sees it is the discriminatory Portuguese iGambling tax regime.

Online gambling is subject to a special online gambling tax, known as IEJO, which varies according to the following: i) In games of chance (including poker and bingo), the IEJO rate is 25%. In poker and bingo the IEJO is levied on the fees charged by the operator and in the other games of chance on the GGR.

The government of Portugal has started the review of its existing gambling tax regime. The government has appointed a working group for analysing the state of the country’s online gambling industry and finding any possible changes required in the system. The working group comprises six members, including representatives from SRIJ and Portugal’s Ministries of.
As a result, applying for a Portuguese license is much less attractive for online gambling companies based elsewhere in the EU: for instance, only one EGBA member has a license in Portugal, while many more are very interested to obtain a license there if the tax regime becomes non-discriminatory and better suited to the online gambling environment.

Portugal’s problem has put many gamblers in a similar position as those in Australia. Namely, forcing them to rely on unregulated sites that regularly try and circumvent existing laws. It also should serve as a bit of a warning to Australian lawmakers as they consider online gambling expansion.

ERBA Calling for Flat Portuguese iGambling Tax

The European Gaming and Betting Association (ERBA) has recently spoken out regarding what they feel is a “discriminatory” tax system for online gambling in Portugal. Under their present structure, Portugal imposes taxes of between 15% and 30% on online casino gross gaming revenue. Other forms of gambling are taxed at a reduced rate based on betting turnover.

Maarten Haijer, Secretary General for ERBA, spoke about this issue on Monday. He stated that the system is “discriminatory because it applies a more favourable tax for some operators, whilst others have to pay a much higher tax based on a broader tax base.”

Consequently, some international online casino companies have chosen to stay out of Portugal rather than deal with the high taxes of the region. It has also resulted in an unexpected rise in unregulated online gambling.

Over 75% of Gamblers Choose Unregulated Online Casinos

In a surprising study, the Universidade Nova de Lisboa and Qdata reported that approximately 75% of gamblers in Portugal opted to use unregulated online gambling products in 2018. That’s up 10% from 2017.

There are multiple reasons for this. The first is that the Portuguese iGambling tax basis used for some providers have forced players off of regulated sites and onto unregulated sites. The other is that Portugal’s regulatory body lacks the tools necessary for preventing unregulated operators from advertising their products in Portugal. It’s gotten so bad that unregulated operators can advertise in local taxi cabs without fear of prosecution.

ERBA Feels Flat Tax is the Best Option

According to ERBA, a flat tax rate based on gross gaming revenue is the best option for making a fair marketplace for regulated online casino and gambling companies. This would even the playing field and also help to reduce some of the player channelization that’s been happening.

According to reports, Portuguese legislators attempted to impose a 25% flat tax on online gambling. However, the proposal failed to pass. Also, it appears that the government is slacking in following up on a promise to review online gambling laws. Back in 2016, the government promised to revisit laws in 2018, but that has yet to happen. It is clear that they must make good on their promise and help quell the rise of unregulated products.

Australia Lawmakers Can Learn From Portugal

Why are the troubles of Portugal relevant to Australia? Australian lawmakers are reportedly looking into whether to regulate online gambling. Therefore, what’s going on in Portugal presently is an excellent case study in things to avoid.

Australia presently bans online gambling and has restrictions in place on advertising services. But they are not foolproof. As you can see from Portugal, failing to restrict unregulated online gambling can result in stifling the regulated market once it is formed.

Next, lawmakers should pay close attention to the Portuguese iGambling tax regime. It is preventing competition and contributing to the unregulated market. The best thing for Australian lawmakers to do is to make a flat tax for online gambling sites to encourage competition and keep Australian tax dollars in the country.

According to some studies, Australian spend more money per person on gambling than any other country. So it makes sense that lawmakers take steps to keep those dollars with regulated websites once they are formed. Of course, lawmakers need to move forward with online gambling regulation. This is so Kiwi’s can gamble online at regulated sites they trust.

Figures for the revenue in the fourth quarter of 2019 in the regulated online gambling market in Portugal have recently been released. The year ended on a high note with revenue up by 52% compared to the amount that was taken during the fourth quarter of 2018.

The Portuguese regulated online gambling market saw remarkable increases in revenue during the fourth quarter of 2019. Despite the record-breaking figures, there has been criticism of the taxation of online gambling in the country. ©fielperson/Pixabay

The Serviço Regulação e Inspeção de Jogos do Turismo de Portugal (SRIJ), the regulatory authority of Portugal, released the figures on the 4th of February 2020. The SRIJ was delighted to announce record-breaking numbers from the end of last year that was generated by the 12 licensed online gambling operators in the country.

A combined total revenue of €65.4m was made by the operators in Portugal during the fourth quarter, which ran from October to December of 2019. The revenue was more than one-half greater than that of the previous year. Additionally, revenue grew by €11.4m between the third and fourth quarters of 2019. This growth represents a new record for the Portuguese online gambling market.

Over half of the revenue that was generated was made by the nine active sports betting operators that are licensed to conduct business in the country. Sports betting accounted for €33.4m in revenue over the quarter which was up 55% on the previous year. In addition to this, there was also a spike in the turnover from betting in Portugal over the period. Another record was set for turnover as it soared to €185.3m; an increase of over two-thirds.

The breakdown of what sports money was wagered on during the quarter remained much the same as that of the previous year. Football was the overwhelming favorite sport for punters to bet on in Portugal once again. The game accounted for almost 75% of the bets wagered in Portugal and was followed by basketball, tennis, and finally hockey.

There was additionally a huge increase in the revenue for online casino games. This branch of the online gambling market generated €32m which was up 49.1% year-on-year. Interestingly, in spite of this growth, the online casino industry that was ahead of sports betting over the two previous quarters was not able to maintain this lead and dropped back into second place.

In total, the amount spent on online casino games in Portugal towards the end of last year came to €852.2m. The same figure for the fourth quarter of 2018 was just €275.8m which highlights how dramatic the revenue increases in the online gambling market have been recently.

The majority of the money that was taken by online casino operators was made through slot games, which accounted for almost 69% of the turnover. The figures for online slot games dwarfed those from roulette and blackjack which were responsible for 13.6 and 8.1% respectively. Also included in the casino totals is online poker, but this took just 9.3% of the money that was spent on casinos.

It seems that a large part of the increase in revenue from online gambling in quarter four was due to a spike in customer registration. Nearly 164k customers had registered with the services provided by operators at the end of 2019 compared to 103.5k during the same period in the previous year.

Rise in Taxation

Operators in Portugal have become concerned with the decision to levy higher online gambling taxes on the industry. The government claimed €23.6m in taxes on gambling revenue in the fourth quarter of 2019. This figure represents a 37.4% increase over the amount taken at the same time in 2018.

Many operators in the Portuguese market have been asking for some form of tax relief for some time now. The taxation system for gambling was set out in the regulatory framework for online gambling in 2015. This system sees sports betting operators being taxed from 8% to 16% on their turnover. Those who offer online casino games are taxed between 15% and 30% on the gross revenues that are generated.

In spite of calls for changes to the system, the Portuguese government is reportedly planning an increase in taxation on online gambling. The online casino tax rate is due to jump from 15% to 25% and the rate for betting exchange revenue will increase from 15% to 35%.

Portugal Gambling Tax Rules

The Portuguese tax regime has been widely criticized. In April of 2019, the European Gaming and Betting Association (EBGA) called for a review on the system that is in place on the grounds that it is “discriminatory” and that it significantly impacts the channelization of players.

Portugal Gambling Tax Returns

The system was described as such because some operators in the country are paying a more favorable tax rate than others. This results in fewer operators being interested in working within the regulated market in the country.

By discouraging operators from applying for licenses and working within the confines of the law, consumers are then pushed towards the unregulated gambling market, which already accounts for significant numbers of players. One study from the Universidade NOVA de Lisboa and Qdata in 2019 demonstrated that some 75% of gamblers in Portugal rely on unregulated services to wager money. This number was a 10% increase from the previous year and is an area of concern for legislators in Portugal.

Some have instead called for a flat-rate tax of 25% for gross revenues from online gambling and at the end of 2018, a system like this nearly passed through the government. There was, however, insufficient support for the bill. After the failure of the potential changes to the tax regime, it is now unlikely that there will be any significant change for the regulated market until 2021 at the earliest.