Caution on approach… EU iGaming tax could be the first step towards harmonisation

Claire Pinson-Bessonnet The EU has many circles to square before it can impose a unified tax on online gambling. Yet legal expert Claire Pinson-Bessonnet argues that the process itself could open a much-needed debate over an industry that has remained on the sidelines of EU policymaking for far too long… The European Union (EU) has spent decades engineering a single market while leaving one fundamental online and cross-border sector largely outside of its political remit … online gambling. A high-risk and mass market sector has remained largely on the sidelines of licensing, common rules, binding standards, uniformed enforcement practices and authorisation of the economic area. National autonomy is left to the discretion of 27 member states, with each taking an individual approach to governing gambling sectors that has led to fragmented technology stacks, core platforms, compliance and customer care solutions. Applying this same condition to the high risk sectors of online banking, insurance, payments and more recently fintech would be unthinkable, with customers, technology, payments and operators routinely crossing borders in these sectors also. An uneasy settlement is now being tested by an unnerving argument ostensibly on taxation. … a dynamic European gambling cannot hide from. By the end of year, member states of the EU plan to settle on the terms of the Multiannual Financial Framework (MFF) for the 2028-2034 budget cycle. EU policymakers deliberate whether online gambling should be forced to provide a new source of revenue for the EU and its target of a €2trn budget to fund the bloc’s future economic and social challenges. Yet this debate must be observed by all industry stakeholders as the EU’s determination and opinions will carry consequences far beyond a current fixation on taxation and cost controls. The observations come from Claire Pinson-Bessonnet, European gambling legal expert and founding partner of French law firm CPB Avocats, providing SBC with her initial assessment of whether the proposed gambling “Euro-tax” could become an unlikely first step towards harmonisation of Europe ever-fragmented iGaming market. For Pinson-Bessonnet, the tax debate would expose Europe to complex scenarios, notably how to define the scope of a possible EU new own resource on online gambling (which gambling activities it would encompass), and how to establish an harmonized tax base or even a viable tax rate. “The debate is presented as one concerning a possible new own resource for the EU, but the legal steps required to create that resource may raise a much broader question for gambling regulation,” Pinson-Bessonnet explains. “Before Member States can decide how an EU gambling contribution should be calculated, they first have to agree on what exactly is being taxed. That means agreeing on definitions, activities and a harmonised tax base that simply do not exist at European level today.” The European Parliament has itself identified the contradiction. In March, a cross-party group of MEPs described gambling and betting as an increasingly “digital and cross-border” sector benefiting from the internal market and EU digital infrastructure, while noting that “national regulatory and taxation frameworks remain fragmented”. For Pinson-Bessonnet, this makes a unionised-tax proposal more significant than the headline question of whether gambling companies should contribute a fixed income to the European budget. “The interesting question is therefore whether taxation becomes the route through which harmonisation returns to the European gambling debate,” she says. “It would not amount to harmonisation of the gambling sector as a whole, but it would oblige Member States to agree common concepts where previously they have retained their own national approaches.” Tax sensitivities of Budget 2028 The immediate backdrop is negotiations over the EU’s next seven-year budget. Article 311 of the Treaty on the Functioning of the European Union allows the Council, acting unanimously after consulting the European Parliament, to establish “new categories of own resources”. At first glance, an EU gambling contribution might therefore appear to require one political decision: unanimous agreement among Member States to establish gambling as a source of EU revenue from 2028 onwards. Yet, Pinson-Bessonnet stresses that the mechanism is considerably more complicated. EU Parliament’s analysis of such potential new resources positioned it as covered by common EU policies, while constituting an EU tax, levied and collected by the Member States. Parliament concluded that an online gambling tax would require “certain harmonisation through an EU directive”. The condition requires fulfilment before a second-stage revenue-sharing arrangement could be established for the tax to be declared as an “Own Resources Decision”. The European Commission has subsequently examined several possible models. A levy could be calculated against operators’ Gross Gaming Revenue (GGR), gambling turnover or indirectly against players through stakes or another measure linked to calculated wagering. The scope of a possible new EU own resource could encompass either all online gambling activities under a single generic definition, including betting and gaming or a sub-set of specific activities (sports betting, gaming, casinos, bingo, poker etc.). Also, according to the European Commission, “an important dimension for consideration would be whether to also include land-based gambling” in the scope of such new own resource. “A clear point of complexity is that the scope of licensed activities is different across the EU national markets”, Pinson-Bessonnet notes. “These are not minor technical choices as each option requires the Member States to decide what activities would fall within the scope of a new EU own resource and whether the same concepts can be applied consistently across 27 national markets.” That uncertainty gets to the heart of the problem, as legal observers will note – “Europe does not have a single gambling tax base because it does not have a single European conception of how gambling should be taxed.” iGaming calls for harmonisation before tax The Commission’s assessment is explicit on this point. Own-resource payments must be defined in a harmonised manner to guarantee equal treatment across the Union. Yet, as the Commission acknowledges, “there is no harmonised definition of online gambling activities as well as no EU legislation for online gambling”. It therefore concludes that agreement on a “harmonised scope and tax base” would be a prerequisite for introducing the resource. Even something as fundamental to industry reporting as GGR lacks an EU-wide binding legal definition. For Pinson-Bessonnet, that is where a debate about taxation begins to acquire much wider significance. “If the EU wants a common gambling resource, it needs a common basis upon which to calculate it,” she explains. “You cannot ensure equal treatment between Member States if one jurisdiction defines the taxable activity differently from another. “The consequence is that some harmonisation has to come before the tax. Member States would first need to agree on the scope of the activity and the tax base before an EU call rate could be applied.” The Commission identifies two potential treaty routes for achieving this. Article 113 TFEU concerns harmonisation of turnover taxes, excise duties and other forms of indirect taxation where necessary for the internal market. Article 115 permits directives approximating national laws, regulations and administrative provisions that directly affect the establishment or functioning of the internal market. The Commission states that either route would require unanimity, and Pinson-Bessonnet believes the distinction is politically important. “Article 113 would send a relatively clear message that the objective is fiscal harmonisation,” she says. “Article 115 potentially carries a different message, because the approximation of national legislation could raise questions extending beyond taxation itself. “That does not mean an EU gambling tax would automatically produce harmonised gambling regulation. But the legal basis chosen matters because it would indicate how deeply Member States could be asked to align their national systems.” Unanimity squared There is a further obstacle that makes the proposal considerably more difficult than the phrase “EU gambling tax” suggests. The mechanism could effectively require unanimity twice. First, Member States would have to approve the sectoral legislation establishing the harmonised definitions and tax base. Then the Own Resources Decision would establish the EU call rate applied to that harmonised base under Article 311 TFEU — again requiring unanimity, followed by approval by Member States according to their constitutional requirements. “It is important to understand that this is not simply 27 governments deciding whether they want a gambling tax,” Pinson-Bessonnet says. “They would first have to agree unanimously on the common rules that make such a tax possible. They would then have to agree unanimously on the own resource itself. Politically, these are two distinct hurdles.” For governments accustomed to guarding gambling as an area of national competence, the first hurdle may prove just as contentious as the second. A Member State would not merely be agreeing to contribute gambling-derived revenue to Brussels. It could also be accepting a common European methodology for defining and calculating the underlying activity. “This is where the discussion becomes interesting from a harmonisation perspective,” Pinson-Bessonnet adds. “Once Member States begin agreeing common definitions for the purposes of taxation, the question becomes whether those definitions remain purely fiscal or acquire relevance elsewhere in gambling policy.” Malta remains a paradox The politics are further complicated by the reversal of traditional positions on European gambling. Jurisdictions such as Malta historically advocated greater recognition of the cross-border characteristics of online gambling and internal-market principles. Yet, countries with established licensing systems and sizable gambling sectors could now prove among the most cautious about a harmonisation exercise whose principal objective is generating additional EU revenue. “A Member State may support greater European coordination in one context and oppose it in another. The interests involved are different when harmonisation determines how revenue is collected,” Pinson-Bessonnet observes. For that reason, she cautions against interpreting the current discussions as evidence that Europe has suddenly developed a political consensus for gambling harmonisation because “it is not sure that the harmonisation topic is politically mature anywhere”. What has changed is that taxation has created a practical reason for Brussels and national governments to revisit questions of common definitions that have previously proved difficult to resolve. Black Market creep There is also an uncomfortable question about who ultimately pays. Europe’s regulated gambling markets already face competition from offshore operators that do not carry the taxation, licensing and compliance costs imposed on locally authorised businesses. The Commission itself acknowledges that controls would require “particular attention” because of the presence of illegal operators. Its working document cites estimates suggesting unregulated firms capture substantial portions of gambling activity in some markets. For Pinson-Bessonnet, any discussion about another layer of taxation would therefore address enforcement. “An EU-level fiscal initiative would need extra arbitrages, for example additional measures to avoid compliant actors bearing additional costs while illegal ones would remain unaffected or even favoured,” she says. That could force Brussels into another uncomfortable discussion. If the EU establishes a common economic interest in collecting gambling revenue, pressure may increase for more structured cooperation on identifying illegal operators, payments, advertising and enforcement. The Parliament has already linked fragmented national frameworks with difficulties in taking “coordinated action against illegal and unlicensed operators”. “A tax discussion might therefore quickly become an enforcement discussion,” Pinson-Bessonnet argues. A door is open For now, a European gambling tax remains an option rather than a settled policy. More importantly, Pinson-Bessonnet does not view the proposal as evidence that European gambling harmonisation is inevitable. The importance lies instead in what would have to happen before such a levy could become effective. Europe currently has no common definition of GGR, no common gambling tax basis and various gambling tax rates applying to online l gambling products. Attempts at broader harmonisation have repeatedly encountered Member States’ determination to retain national control. A Euro tax would not suddenly create a single European gambling market. Nor would agreement on a tax base automatically harmonise licensing, advertising, consumer protection or enforcement. But it could establish a significant precedent. “From a legal and political perspective, agreeing on definitions and a tax base for a specific fiscal purpose would mean Member States accepting a common European framework in an area where common rules have historically been extremely limited,” Pinson-Bessonnet concludes. “That is why the own-resource debate deserves attention beyond taxation. The question is not simply whether Europe will tax online gambling to fund the EU budget. It is whether there is a political will among EU Member States tocreate a tax that would lead them to define online gambling collectively.” What begins as an argument over how Brussels pays its bills could therefore revive a much older question for the industry: if iGaming is increasingly digital and cross-border, how long can Europe maintain 27 national approaches without either a framework — or even a roadmap — for harmonisation?