Swedish Report: 15-20% Tax Rate is Optimal for High Channeling and Favorable Tax Returns

Updated: Feb 6

The Swedish government has given a special investigator the task to submit a proposal for a new gambling regulation based on a licensing system, which will contain, among other things, a full system of taxes and levies. The system will replace the current regulation, where a few actors have the exclusive right to offer online gambling to Swedish consumers.

Our assessment is that a high channeling rate is reached at a tax-rate of 15 percent, and does not increase significantly at lower tax-rates. The result is that tax-rates below 15 per- cent would at best give marginal increases in the channeling rate, but at the expense of a substantial reduction in tax revenue.

The directive states "... the conditions for funding of government operations and publicly beneficial purposes is to be preserved to the largest extent possible.”1 Further, "The demand for online gambling should be channelized to safe and controlled offers”2. The concept of channelization, or channeling rate, usually refers to the proportion of Swedes online gambling that occurs within the licensing system.

The directive expresses conflicting objectives. In order to maximize the channeling rate and to attract as many gambling operators as possible in joining the licensing system the tax- rate should be set to zero percent. This would minimize the cost of acquiring a license, which would increase the probability that the operators would choose to acquire a license. However, such a solution would also mean that the tax revenues would be zero, and, consequently, that there are no conditions for funding. A tax-rate that also ensures state funding should thus be set to higher than zero.

However, a higher tax-rate means that it will become more expensive and thus less attrac- tive for the gambling operators to operate within the licensing system. If the tax-rate is set too high, gambling operators would choose to refrain from participating in the licensing system, and thus cannot be taxed and the demand for online gambling cannot be channel- ized to the offers within the system, i.e. channelization and tax revenues fall.

A tax-rate on online gambling within a licensing system therefore needs to balance these effects in order to achieve both high channelization rates as well as high tax revenues.

Download the Full Report Here: report-bos-gaming-in-holland.