Volume: 11 Issue: 5
The Spanish gambling regulator, The General Direction of Gaming (DGOJ), is getting ready for a showdown with internet service providers (ISPs) over the blocking of soon-to-be illegal gambling websites, while businesses are preparing for the country's new tax regime, since the Spanish Ministry of Finance confirmed on 8 May the new regulatory framework will come into force on 1 June.
From then - until the first licences are granted - "the market becomes illegal", says Cristina Romero, Partner at Lloyra, while Pedro Lopez, of Martín Andino Abogados, adds that "illegal operators are supposed to pull out of the market [on 1 June] and, in fact, the Spanish regulator will be capable of sending injunctions to ISPs or payment providers asking them to block [unregulated] sites and transactions".
Although no licences have been issued yet, the DGOJ has confirmed it will start granting licences after 1 June. So far, more than 60 operators have applied, including PokerStars, Ladbrokes and Betfair.
Although there is great interest, businesses are bracing themselves for the country's new tax regime. From 1 June, a gross gambling revenue tax of 25% will be enforced. "Authorities expect massive revenues, since the market is substantial", said Romero. "But we will see, the current rates are too high." Lopez also thinks "the tax rate is high". Although he expects "movements to lower it down, that won't be in the near future".
Lopez points out that the "the most troublesome issue is the taxes for players. Their winnings will be subject to their personal income tax, and therefore, depending on the level of personal income of the player, could be as high as 52%". Lopez also stresses that "players cannot compensate winnings against losses, so professional players will be critically affected by this situation".
The new tax regime might drive some parts of the industry underground or offshore. "This has happened in other recently regulated countries in which there was a grey market out of the control of the tax authorities", said Lopez, as website blocking "is, of course, not 100% effective".
The new gambling law in Spain was passed in February 2011, but implementation was delayed several times. A number of reports have suggested the Spanish market is currently worth between €210m and €450m. The DGOJ has announced a code of conduct for advertising which will be published by the end of May.