Portugal came under the spotlight of the gambling scene, after it announced its intentions to regulate its market for foreign operators. The main drive behind this move was to boost the country’s economy, which was left threadbare due to the financial crisis, which the country suffered between 2010 and 2014. In a desperate need of financial injection, the local authorities passed a bill to legalize casino gambling in Portugal and allow foreign operators to enter the previously monopolized gambling market.
In April 2015, the country’s government officially introduced a new gambling law, that allows foreign casino operators to apply for a license from the country’s gambling regulatory body Serviço de Regulação e Inspeção de Jogos (SRIJ). Many foreign casino operators were impatiently waiting for Portugal to regulate its market. Once the long-awaited bill, which would serve as a lifeboat for the country’s threadbare economy, came into effect, many foreign operators backed off from their intentions to enter the newly-regulated market. And there is a good reason for that – the sky-high tax rates, imposed on the foreign operators.
Portugal’s Economic Troubles
It is not a secret that Portugal faced a number of economic troubles in the recent years. The Great Recession in Portugal led the country to a deep economic crisis, being unable to pay its national debt without help from elsewhere. To prevent such a debt crisis, the country applied for a financial support. In 2014, the EU Commission, the European Central Bank and International Monetary Fund saved Portugal’s lackluster economy, throwing it a lifeline of €79 billion. However, the country’s officials needed to find a solution regarding the excessive levels of debt.
Consequently, the country’s officials needed to discuss and find possible solutions to the impasse. Among all the proposals, the gambling trade seemed to gather momentum. In fact, the gambling industry has witnessed similar scenarios and the news for the possible regulation of the market came as no surprise. This, on the other hand, would break the chains of the Portuguese National Lottery monopoly (also known as Santa Casa de la Misericordia) and allow some serious competition on the market.
The lawmakers started to work on a new legislative piece, aiming to regulate the country’s gambling market for foreign operators. Many foreign online gambling companies expressed their willingness to enter the young Portugal’s market, impatiently waiting in front of the Portugal’s gates. The lawmakers, though, decided to benefit as much as possible from this fact and overtaxed the industry, taking the risk to damage the market before its actual opening.
Their “get rich quick and rest for many” approach scared off many casino operators, who decided to back off from their plans to enter Portugal’s market. That resulted in only a handful of operators, who applied for a license and entered the market.
How Scary Exactly are the Taxation Ranks?
The new legal framework introduced a turnover tax regime, which increases in accordance with the operators’ income growth. In other words, the tax rate is not fixed and it depends on the turnover, which is the worst-case scenario according to casino operators. The tax rate on sports betting ranges from 8% to 16%, while the tax rate on casino revenues varies from 15% to 30%. This led to a strong taxation criticism. Many industry-involved experts even warned the country’s officials that the high taxes will destroy the market and will only hamper the anticipated economic growth.
The Remote Gambling Association (RGA), a trade association of some of the world’s largest Internet gambling operators outlined that the high tax rates have turned the once luring gambling market into a nightmare, strongly recommending the country’s officials to rethink their decision. Nevertheless, Portuguese ministers approved the new taxation system, defending it as compliant with the European Union’s competition laws.
Good Intentions Have Unintended Consequences
The officials’ firm stance on the taxation rates led to the projected negative effect on the gambling industry. At present, there are only 11 licensees, including casino and sports betting operators, which operate throughout the country. The latest issued license was given to A Nossa Aposta – Jogos e Apostas Online, S.A for the provision of online casino gamesas recently as 22nd September this year. Here, it is interesting to note that the first foreign gambling operator to enter the Portugal’s gambling industry was Betclic, which has been authorized to offer sports betting options. However, this is far from enough to deploy the real potential of the market and generate the needed number of players, so that the country’s economy can experience some actual revival.
Shared Poker Liquidity Aims to Heal the Wound
Portugal’s regulated online poker market is one of the youngest in Europe. The first poker website to appear on the Portugal’s gambling scene was PokerStars, which got the license to operate in November 2016. Currently, it is still the only poker site to operate in the country. Nevertheless, it seems that it has attracted the interest of many players. Similar to France, Italy, and Spain, Portugal regulated its online poker market in a way to prevent local people to play against foreign players. This was a significant setback in the development of the industry in all the aforementioned 4 countries.
Being aware of that fact, top officials from all the 4 countries signed a poker liquidity agreement, which is to allow players from these countries to play against each other. The shared poker liquidity project is to be completed by the end of the year or the very beginning of 2018. By undertaking such move, Portuguese officials place efforts to minimize the negative consequences from the unbearably high tax rates and revive the industry, which is currently on life support. To climb out of the financial hole, the country should consider also some more changes, mainly related to the taxation system.