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Delays in Denmark Online Gambling

By: Adam Richards, Tuesday December 7th 2010
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Earlier this year Denmark had submitted its draft online gambling law to the European Commission (EC). It was then expected that the EC would clear the proposal by October, the licenses would be issued by the end of December and the regulated regime would go into effect on January 1, 2011. However this schedule has gone awry because of complaints filed with the EC by the Danish slot machine association and land-based casinos over proposed tax rates. Online gambling operators who were ready to enter Denmark's market are presently uncertain about when things will get sorted out. Even the Danish government is non-committal, only stating that it is trying to enact the law before next summer.

The bone of contention is the proposed tax rate for online gambling operators, which has been announced as 20% on gross win. The land based gambling operators pay 41%, which is more than double. This disparity amounts to unfair competition according to them and experts believe that the EC has a tough case to solve. April Carr explained the situation succinctly. He said that the Danish government would argue that the European Union Member States have the discretion to decide taxes and tax rates within their countries. However, if the tax rates are such that preferential treatment is given to one segment of the industry then the "State aid" rules come into play. Carr said, "The land-based operators are likely to argue that proposed tax rate for online gambling operators is a form of State aid, which is illegal if implemented without the Commission's prior approval." Therefore the Danish government is unlikely to implement the new online gambling regulatory mechanism till the EC has determined whether or not the online gambling tax rate is a form of State aid. And this could take a fair bit of time.

Pontus Lindwall, chief executive of Betsson, spoke out in support of Denmark. He said that all concerned should realize that "creating national legislation which is in harmony with EU-law" is a complex process. He added that the Danish government is doing the right thing in trying to get the mechanism correct from the start. Thomas Petersen, chief operating officer of Bet24, concurred with Lindwall's view. He said, "It is of course also in the new licensees', the Danish Gaming Authority and Danish consumers' best interest that the new gaming legislation is fully approved by the EU from day one." He, however, would have liked the Denmark minister to announce a specific revised date instead of keeping it vague. But the fact of the matter is that the issue is now out of the Danish government's control.

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