On Wednesday, we reported on the new study (download here) by noted economic research and consulting company Ecorys on the relationship between gaming tax and online player channeling rates.

Based on a comprehensive review of existing literature, the study takes into account all relevant studies and reports on several countries, including the Netherlands, the UK, France, Spain, Sweden, and Norway.

Ecorys’ researchers found that in case of a gaming tax rate of 20%, the stated policy goal of the Dutch remote gaming bill, a player channeling degree of 80%, is on the upper limit of the expected range. The current proposal of a tax rate of 29% (plus 2% other levies) would be likely to result in a slower and (much) lower degree of player channeling.

Today, we’re following up with an exclusive Q&A with the study’s lead author Robert Haffner.

 

With a tax rate of 29% plus another 2% other levies, what would be a best-case scenario with regard to the player channeling rate?

“It is hard to say what a best-case scenario would look like, but realistically we should expect a player channeling rate significantly below 80%. Based on the studies we analyzed, we would likely end up somewhere between 65 and 70%, instead.”

 

To what extent can enforcement measures increase the expected player channeling rate?

“Unfortunately, there is very little literature on the relationship between enforcement and player channeling. Although strictly speaking this topic falls outside the scope of our study, I expect that it will be very easy for players to visit unlicensed websites. Enforcement is inherently difficult in dynamic markets, such as online gambling.”

“Moreover, with a lower tax rate, considerably less enforcement would be required.”

 

Based on your findings, what would be an optimal tax rate for the online gaming sector?

“We recommend an initial tax rate no higher than 20%. In our view, the current proposal, which starts with a high rate of 29% that might eventually be lowered, has it backwards. The first moment a market gets regulated, is the best moment to channel as many players as possible toward a licensed offering. Once this moment passes, it becomes more difficult to entice players to make that switch at a later time.”

“It thus would be better to start off with a lower tax rate; and, if it turns out to be feasible in regard to the stated channeling objective, increase this rate at some point in the future.”

 

Your study was commissioned by online gaming operator Pokerstars. Did this influence your findings in any way?

“Our very reputation hinges on being independent. If any other party had commissioned this study, we would have reached the exact same findings.”

 

Debate

The Lower House will hold a plenary debate the remote gaming bill in the week of April 4. Gaming in Holland will be present and will live tweet directly from the floor and report more extensively after the debate has concluded.

It will be interesting to see whether the report by Ecorys, which closely reflects the original recommendations of the Ministry of Security and Justice for a 20% online gaming tax rate, will manage to have an impact on the debate – or perhaps even on the recent amendments proposed by MP’s Jeroen van Wijnbergen (VVD) and Mei Li Vos (PvdA) that introduce a 29% tax rate.

 

Stay tuned for more!