Playtech's Earnings Affected by Italy's Gambling Tax Increase

On Sunday, Italy’s Senate approved the gambling tax increase and it will soon become a law. To be more precise, the government has voted for the amended version of the new budget…

…that was delivered to the Chamber of Deputies on Monday.

The next step is for the budget to be reviewed by the Budget Committee. Only after this has been done can the full Chamber put it to a vote and that will most likely happen on Friday.

Unexpected Increase

The gambling operators in Italy disapproved this abrupt decision to hike tax rates on online casino revenue, sports betting and virtual betting, but online gambling industry isn’t the only one affected…

…since land-based sports wagering is also hit by such a move.

The law will come into effect starting January 1st and here are the trends presented in numbers:

• For casino revenue, tax rates jumped from 20% to 25%
• For sports betting, tax rates increased from 22% to 24%
• For virtual betting, tax rates are raised from 20% to 22%
• For land-based sports wagering, tax rates from 18% to 20%

The Italian government really outdid itself this time. Land-based gaming machines too will have to set aside more money to cover the expenses starting 2019…

…but the biggest problem is that hikes are higher than the government originally promised. And to make matters more complicated, after the first promise came the announcement on Wednesday but the final numbers exceed the ones spoken a week ago.

This is how that looks in figures – the tax rate on amusement with prizes machine revenue will grow by 1.35 points whereas the minimum payout rates will decrease to 68%. In the meantime, the payout for video lottery terminals are down by 1% to 84, whereas taxes level up by 1.25 points.

More Money in Coffers

With this unpopular move, the government hopes for an extra €770 on a yearly basis and most of that money will come from a land-based branch of gambling. Despite the bitterness and complaints from the operators, the government remains firm in its decision.

Deputy PM of Italy Luigi Di Maio bragged about the taxes in the gambling sector being the highest ones in Europe. He also made a controversial statement by saying that the goal was to “take money from those who in recent years had taken too much money from Italians.”

How Will This Affect Playtech?

Of course, the imposed law on gambling tax rates will affect everyone in business and Playtech is only one of the companies. They have spread their local influence by purchasing the remaining of Snaitech.

They issued a notice earlier in the week that their yearly earnings for 2019 will be cut “by approximately €20-25 million before any mitigating actions.”

Playtech has had a rough year and its shares opened at 870p…

…only to close at 370p. The lowest point was 357p before they staged a minor rally.

Source:

“Italy’s gambling tax hikes to do damage to Playtech’s earnings”, Steven Stradbrooke, calvinayre.com, December 25, 2018.