Consultations reveal operators' fury over Sweden's proposed GGR tax hike

Significant change could be on the horizon in Sweden after the government proposed a four percentage point increase in GGR tax from 18% to 22%.

The proposal, should it be approved in parliament, will come into effect from 1 July 2024, having been met with frustration and furore from within the industry.

The Swedish Trade Association for Online Gambling (BOS) has been at the vanguard of this displeasure and has made it plain that it fundamentally disagrees with the proposal.

BOS went as far to say the tax increase would be the “best Christmas present” for the black market, amid fears an increased tax rate would lead to player leakage and a lower channelisation rate.

Alternatively, BOS’ remarks stand in contrast to the Swedish Gambling Authority (SGA), which has said it holds “no substantive views” on the proposal, despite noting a potential channelisation impact.

Channelisation in Sweden has continued to fall since the re-regulation of the market in 2019, with estimates from BOS putting it at 77% and just 72% for online casino.

Following the government’s publication of consultation feedback to the proposal, BOS has now published its own set of responses which it collated from a series of leading operators in the market.

Here, EGR details those responses, which house major concerns over player protection, channelisation and the future of Swedish gambling.

Kindred Group

Kindred Group’s five-page submission to BOS, written by head of social policy Pär Nygårds, took aim at the Swedish government for attempting to raise tax in the market despite the country’s floundering channelisation rate.

In fact, Nygårds highlighted that should the government choose to focus on pushing the channelisation rate above the 90% threshold, income for the state would rise by around SEK519m.

This figure, according to Nygårds, corresponds to the returns from the proposed GGR tax hike.

Additionally, Nygårds highlighted the impact on Swedish sport should the tax hike be put in place, with Kindred’s flagship brand, Unibet, holding a strong sponsorship position in the market.

The head of social policy noted that an increase in tax would have a “long-term negative impact on the possibility of licensed gambling companies to continue investing in Swedish sports”.

Nygårds said: “When considering the need for a competitive licensed market, strong consumer protection, as well as consideration of the media and the sports movement’s need for funding, the state’s potentially increased tax revenue is not proportionate to the risks of the proposal.

“Several studies point to failing channelisation, which is a clear signal that the Swedish licensing system is weakening. Raising the gambling tax in that situation risks worsening the negative trend and leading to unlicensed gambling companies.

“Kindred therefore rejects the proposal in its entirety,” he added.

Betway

Betway’s submission took the shape of a letter penned by CEO Anthony Werkman, in which he said the proposed tax increase was “inappropriate” and would work against licensed firms, players and the government.

Werkman argued an increase in tax would lend itself to growth in the black market, while he noted that should the measure come into effect, Betway might be inclined to look to invest in other markets with more favourable tax rates.

The CEO wrote that the increase in GGR tax would “threaten the very existence of the regime and its goals”.

He continued: “The proposed tax increase on licensed operators will considerably negatively impact the affordability of the Swedish online gambling regime and may have the effect of driving licensed operators out of the market, thereby not only limiting local fiscal revenues from operators but creating additional opportunity for black-market operators, notorious for nefarious illegal practices and failure to contribute fiscally to local economies.”

Betsson

Ivana Pejic, Betsson lead compliance manager, took on the mantle of submitting the group’s concerns, in which she called on Sweden’s government to further support the SGA, rather than pursue tax increases.

Once again leaning into the threat of the black market, Pejic argued government resources would be better served beefing up the regulator’s powers to tackle unlicensed firms.

She said: “The government’s priority should be to give increased resources so they can use the tools they have been given to reduce unlicensed gambling. When these measures yield results, a new dialogue/investigation on the degree of channelisation can be resumed and reviewed on whether there would be room for a tax increase and what such a tax increase would lead to.”

While Pejic noted there could be a conversation to be had around a potential future tax change, she noted that in its current state, the government had failed to “thoroughly analyse” the potential impacts.

She continued: “Our view is that the proposal completely lacks impact analysis and demands that the government instead thoroughly analyse the effect of what such a tax increase would lead to.

“Based on current channelisation studies and experience from other countries, our assessment is that the proposed tax increase would primarily benefit the unlicensed gaming market and thus lead to poorer consumer protection.”

888

In 888’s letter, the operator said that the tax increase would result in “bolstering government revenues rather than foster the growth of the market” while noting that tax increases can be effective should the size of the respective market not decrease.

However, the London-listed firm said the government’s proposal “seems to be based on a precautionary measure to foster growth of the market”, something 888 disagreed with.

The operator said: “It is good to point out that higher tax rates in the gambling industry generally result in a small amount of licensed operators that would mainly cater for a narrow base of consumers; on the contrary, low tax rates give operators the flexibility to grow their player base, and consequently create broader benefits to the industry and its consumers.”

888 also pointed to the fact the regulated Swedish market had been live for less than five years and that the market was yet to stabilise, as demonstrated by recent fluctuations in the channelisation rate.

The operator added: “We believe that keeping the tax rate low would contribute to the economic growth and prolongate the gaming industry in Sweden, while a high rate may result in an accumulation of negative influences, such as an upsurge in problem gambling, that would in turn create a much bigger problem for the community’s welfare and the state as a whole.”

LeoVegas         

LeoVegas’ submission in the form of a letter written by the group’s director of communications and public affairs, Daniel Valiollahi, centred on the firm’s concerns over a lack of intervention relating to the channelisation rate in Sweden.

Valiollahi asserted that the company rejects the increase in tax and suggested the government had “failed in its preparation work and in an unsatisfactory manner failed to investigate the negative consequences of a tax increase”.

Those failings relate to how the tax increase would impact channelisation, competitive conditions for the market, investment into sport and media and how customers would be impact.

Valiollahi wrote: “In recent years, LeoVegas has noted with great concern and brought to the attention of the authorities a serious negative trend with decreasing channelisation. During the past year, several different companies have measured the channelisation. Regardless of the measurement method, all surveys have shown a dangerously low channelisation rate of under 75% when it comes to online casino.

“No measures or proposals have yet been presented from either the government or the Swedish Gambling Authority to break the trend. No initiatives have been taken or initiated to secure the Swedish gambling market for the gambling companies licensed in Sweden.”

ComeOn Group

Multi-brand operator ComeOn Group also aired its concerns to the BOS, with head of Swedish complianceLefteris Constantinou writing to the trade body.

Among similar concerns over channelisation, an increase in gambling-related harm and the black market, Constantinou also argued it was too early to add another regulatory headwind to the Swedish market.

The head of Swedish compliance said that given in July the government introduced new measures, including a licensing framework for B2B firms and giving the SGA powers to implement payment blocks, a new tax hike would add another straw to the market’s back.

Constantinou suggested it was “appropriate” to wait until those measures, which came into effect from 1 July, could be fully evaluated before pressing ahead with a tax hike.

He wrote: “ComeOn Group recommends that the government carefully weigh the proposed tax rates against the risks presented above and avoid introducing changes before the effects of measures to reduce unlicensed gambling have been assessed.

“It is important to ensure that the tax decision does not endanger the competitiveness of the Swedish market and the wellbeing and health of Swedish citizens. ComeOn Group rejects the proposal for a higher gambling tax,” he concluded.