Tax Issues May Impede Growth of Alderney & IoM Licensees

As once restrictive gaming regimes in Europe open their markets to licensed online gaming operators, tax authorities in those countries are taking steps to ensure that players are fully informed of their tax obligations, resulting in the creation of unofficial lists of recommended sites and licensing jurisdictions.

While this is good news for most European online gaming operators, those licensed in fast growing jurisdictions such as the Isle of Man and Alderney could find it to be an impediment to their future growth.

The issue has come to the fore recently with Denmark's publication of a tax guide for poker players, released after authorities there discovered that millions of euros in taxable revenue were going undeclared as a result of confusion amongst players. The cause of the confusion? Amongst other things, uncertainty as to the boundaries of the European Union.

While licensing jurisdictions such as the Isle of Man and Alderney are clearly within Europe, for most purposes including taxation, they are considered to be outside of the European Union or European Economic Area.

A majority of European countries apply some level of tax to gambling proceeds, however winnings are tax-free if received from a gaming operator licensed by an EU/EEA member state.

In a new section of its website dedicated to poker players, the Danish tax authority (SKAT) lists a number of tax-free sites which include Fortune Poker, Bet24, PartyPoker and Ladbrokes, amongst others. SKAT's tax-free gaming list is made up of operators who have sought a binding opinion from the authority on behalf of their players that income will not be subject to tax.

While such gaming sites will no doubt appreciate the free referrals from SKAT, others in less favoured jurisdictions could see players deterred by the prospect of having to hand over a sizeable portion of their winnings to the state.

Two of the biggest names in online poker, FullTilt and PokerStars, may find themselves in just such a predicament.

With the introduction of the UK white list, a list of jurisdictions from where operators may advertise into the UK and other European countries, FullTilt wasted little time in supplementing its Kahnawake gaming license with one from the Alderney Gambling Control Commission.

With the tax authorities in Denmark and other Scandinavian countries - a key online gambling market - increasingly targeting online gaming proceeds, they too have begun to educate players on the issue of taxation, resulting in the creation of unofficial lists of tax-free gaming sites.

As more and more European countries pursue taxable gaming proceeds during these difficult economic times, so too will more and more players become aware of the distinction between an EU/EEA licensing jurisdiction as opposed to one which happens to be in Europe.