A Market StudyOnline GamblinG in Greece

Online Gambling In Greece - A Market Study

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IntroductIon

The Greek population’s gambling expenditure has historically been considered high compared to other European countries, but it has stagnated or declined during the financial crisis.

The regulated land-based Greek gambling market, including lottery products, casinos and the retail betting monopoly OPAP, produced annual revenues of around €1.5bn in 2013 from a population of just 11m. Yet while Greeks spend more than many nations on land-based gambling, their expenditure on online gambling currently represents a much smaller amount – we estimate c. €210-250m revenue in 2014.

In much of Europe there has been a decisive shift to the national licensing of online gambling but the process is not yet complete in Greece and the market remains in a transitional state, with temporary licences in place that are not yet consistent with EU law.

In the following summary our aim is to address the uncertainty that surrounds the size, scope and legal basis of online gambling in Greece and to put the sector into a wider, regulated, European context.

ProPosed reforms

Greece’s online gambling market has been highlighted as one of seven potential areas of economic reform that may enable Greece to meet the conditions for its next bailout installment.1

In a letter leaked on March 6, 2015 finance minister Yanis Varoufakis said that the sector presents significant untapped public revenue opportunities through a new licensing regime, through harnessing the European experience and by improving upon the existing Greek legislation (4002/2011). Further statements were made with regards to the annual volume of online betting transactions through the temporarily licensed providers exceeding €1.5bn, that the estimated overall online market exceeds €3bn and that additional public revenue

1 Letter from Greek finance minister Yanis Varoufakis to Jeroen Dijsselbloem, president of the Eurogroup.

http://www.gamblingcompliance.com/system/files/news-analysis-attachments/Varoufakis percent20letter.pdf

through the taxation of licensed online gambling could exceed €500m per annum.

Experience in other European jurisdictions suggests that there would be market sector growth with reformed legislation and regulation. Still, the figures quoted above may indicate some confusion between “turnover” (sometimes referred to as stakes or the amount bet) and “revenue” (being the difference between the amount bet and the amount returned to players in winnings).

Most European jurisdictions, including Greece, have settled on a revenue-based method of calculating both market size and for determining the appropriate levels of tax. This revenue analysis is the most accurate and appropriate way to compare Greece with other European jurisdictions, as we have attempted to do in the following sections.

the Greek onlIne GamblInG market

The regulation of online gambling remains in a transitional state in Greece and a public tender for online licences, as enabled by the 4002/2011 gambling law, has yet to take place.

In December 2011, the Greek Ministry of Finance determined in Decision 1248 that certain online gambling operators would be able to apply for an interim license. These interim licensed operators were bound by a number of conditions and have to pay a tax of 30 percent of their revenue plus a 10 percent tax

on player winnings (also known as withholding tax or WHT).

In 2012, Greece issued temporary licences to 24 operators who applied and met the various conditions.Subsequently, the Hellenic Gaming Commission issued warning orders in November 2012 to all unlicensed operators then serving the Greek market, ordering them to stop providing services in Greece or risk fines ranging from €200,000 to €500,000 and criminal sanctions.

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A number of operators, including well-known international brands, withdrew from the market or ceased their advertising and marketing in Greece.

In July 2013 a blacklist of outlawed online gambling sites was circulated to Greek ISP providers. This blacklist, which has been updated a number of times,now consists of 439 domain names.

At present, we believe that c. 20 of the x24 interim licensed companies are active in the Greek market and that between them they represent c. 33 domains or brands. A list of those companies and brands is presented in Appendix A.

Apart from the interim licensees, OPAP, which holds a retail betting monopoly in Greece, and which was fully privatized in October 2013, also launched its fixed odds betting website, pamestoixima.gr, just ahead of the 2014 football World Cup. It should be noted that OPAP claims a monopoly on online betting but that claim remains subject to dispute, with the EU Commission believed to be closely involved in the discussions.

Following extensive research, and in consultation with a range of industry sources with knowledge of the

matter, GCRS found a broad consensus that the current revenue value of the overall Greek online gambling market sits between €200m and €250m per annum. This estimated online revenue value excludes OPAP which is yet to declare their full 2014 financial results.

This estimated range is consistent with online market size projections made in recent years by retail betting monopoly OPAP, equity research analysts at Eurobank and GCRS.

This €200-250m estimated revenue range is also consistent with the minister’s €3bn overall market turnover estimate. Set alongside one another, the estimates imply a fairly standard market-wide gross win margin of around 7.5 percent for sportsbetting, which represents the major market sector in Greece.

Based on a mid-point of €225m in revenue and at a tax rate of 30 percent of revenue we estimate a current tax take of c. €67.5m. Both this estimated market size and the estimated tax take puts Greece in a relatively healthy position compared to its European peers as can be viewed from the comparisons in the following sections.

the uk onlIne GamblInG market

The UK Gambling (Licensing and Advertising) Act 2014, introduced a point of consumption licensing system for remote gambling in the UK requiring online gambling operators who transact with players or advertise to consumers in Great Britain to obtain a licence from the UK Gambling Commission.

During the 2014 application period the UK regulator received 178 applications for operator licences and it is anticipated that the great majority of these will be granted. On December 1, 2014 new tax rules were

introduced and online licence holders must pay a tax of 15 percent of their gambling revenues. No player winnings tax or withholding tax is charged.

GCRS estimate the 2014 licensed market size to be €3bn and that the 2014 tax take, had it been calculated at the rules that now apply, would have been €451m. It needs to be noted that although there have been recent changes in both legislation and regulation, the UK has been considered as an open and licensed market since 2005.

the sPanIsh onlIne GamblInG market Online gambling activities were first regulated in May 2011 through Law 13/2011.

In February 2014, the Spanish gambling regulator, the DGOJ, reported 51 active online gambling licences.Law 13/2011 did not establish a single tax regime for all online gambling products, however the most popular online sectors including sports betting, fixed-odds

horseracing, poker and casino games are all taxed at 25 percent of revenue.

In 2014 the DGoJ reported total revenue from licensed online gambling to be €254m and we estimate a tax take of €64m in that year. No player winnings tax or withholding tax is charged.

Online Gambling In Greece - A Market Study

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the danIsh onlIne GamblInG market

A new Danish licensing system for online gambling, applying to betting, casino games and poker came into force on January 1, 2012, when 45 applicants received 63 licenses.

Under the Danish regime online license holders pay a tax of 20 percent of revenue. No player winnings tax or withholding tax is charged.

Based on the DGA’s (the Danish regulator) data we estimate that the online gambling revenue from Denmark was €250m in 2014 and that the Danish Government collected €50m in tax revenues in that year.

the ItalIan onlIne GamblInG market

Italy was one of the first jurisdictions to regulate remote gambling operations in Europe and its market size has benefited from this long history.

In 2014 there were 119 active online licences and approximately 24 inactive ones, according to figures from the Italian regulator.

In Italy the applicable tax regime currently varies somewhat depending on the type of activity. Most online gambling activity is taxed at the rate of 20

percent of revenue. The current anomaly for sports betting is due to be resolved as of July 2015 when broad tax reforms, are due to be implemented making the 20 percent of revenue tax standard across all online products,. No player winnings tax or withholding tax is charged.

The Italian online gambling market was valued at €728m in revenue for 2014 and at the standardized tax rate of 20 percent of revenue for all sectors would have produced c. €146m in tax.

summary and analysIs

Member state

Is online gambling legislation EU compliant?

Tax rate as percentage of revenue *

Player winning tax

Greece No 30 Yes

United Kingdom

Yes 15 No

Spain Yes 25 No

Denmark Yes 20 No

Italy Yes 20 No

Across the EU, with governments facing severe fiscal constraints and eager to increase their income, attention has turned towards gambling provision as a valuable source of tax revenues.

Yet the cross border nature of online gambling and its fiercely competitive nature requires careful focus on the need to balance tax rates and market growth.

There remains a compelling argument that, since consumers will likely engage in illegal online gambling anyway, it is better to create an attractive legal offer, with appropriate tax under state supervision, than to allow the revenues to go to unlicensed operators.

The below chart illustrates how Greece compares with the regulated online gambling markets of the UK, Italy, Spain and Denmark in terms of overall licensed online gambling revenue in 2014.

* In Spain, the most popular games, including fixed-odds sports betting and casino games, are taxed at 25 percent of revenue. For pool betting and contest games a turnover tax applies

Italy’s Delega Fiscale, due to be implemented in July 2015, will introduce a 20 percent revenue-based tax for sports betting, bringing it into line with all other online gambling products.

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Applying country-by-country tax rates to the revenue figures outlined previously, the below chart contains estimates of the online gambling tax yields generated in each of the five selected jurisdictions last year. The above chart illustrates widely divergent levels

of online gambling revenue per capita across the group of five, with Greece sitting well above fellow Mediterranean countries Italy and Spain on a population-adjusted basis.

Using national gross domestic product data from the International Monetary Fund, the above chart compares the selected countries in terms of online gambling revenue as a percentage of GDP in 2014.

Greece vs Selected Others: Est. Regulated Online Revenue as a percentage of GDP - 2014

Revenue / GDP

0.16

0.14

0.12

0.10

0.08

0.06

0.04

0.02

0.00 UK Greece Denmark Italy Spain

Source: GCRS estimates, IMF

0.143 percent

0.115 percent

0.098 percent

0.046 percent

0.025 percent

Greece vs Selected Others: Est. Online Gambling Tax Yield (€m) - 2014

Revenue (€m)

500

450

400

350

300

250

200

150

100

50

0 UK Italy Greece Spain Denmark

Source: GCRS estimates, Industry estimates

*UK figure is a theoretical estimate based on new tax regime introduced in Dec-14

Italy figure is calculated on the basis of pending tax rates

451 146 68 5064

Greece vs Selected Others: Est. Regulated Online Revenue Per Capita (€) - 2014

Revenue (€m)

50

45

40

35

30

25

20

15

10

5

0 UK Denmark Greece Italy Spain

Source: GCRS estimates, World Bank

46.9 44.5 19.0 12.2 5.5

Greece vs Selected Others: Est. Regulated Online Revenue (€m) - 2014

Revenue (€)

3,500

3,000

2,500

2,000

1,500

1,000

500

0 UK Italy Spain Denmark Greece

Source: GCRS estimates, Industry estimates, Company data, Agipronews, DGOJ, Danish Gambling

3,006 728 254 250 225

Online Gambling In Greece - A Market Study

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aPPendIx a

Interim licensed company Status Brands operating under the license Products

B2B Gaming Services Ltd - Malta ACTIVE

www.Betshop.grwww.bet365.grwww.Magicbet.grwww.Verusbet.grwww.Callbet.grwww.greenwin.gr

Sports - CasinoSportsSports - CasinoSportsSports - CasinoSports - Casino

Gambling Malta Ltd - Malta ACTIVE www.Stoiximan.grwww.Betsonic.com

Sports - CasinoSports - Casino

Sporting Odds Limited - UK ACTIVE www.Sportingbet.grwww.Vistabet.gr

Sports - Casino - PokerSports - Casino - Poker

Novigroup Limited Group - Isle Of ManLogflex Ltd - UKDoms Holding Ltd - UK

ACTIVEwww.Novibet.grwww.Spinbet777.com/el/www.Statusbet.com/el/

Sports - CasinoSports - CasinoSports - Casino

Personal Exchange International Ltd - Malta

ACTIVE www.Mybet.com Sports - Casino - Poker

Lucky Stream Limited & Diamond Link Limited - MaltaDiamond Link Limited - Malta

ACTIVE

www.Playbet.comwww.nitrobet.grwww.pokerstars.grwww.fulltiltpoker.gr

Sports - Casino - PokerSports - Casino - PokerPoker - CasinoPoker - Casino

Love2Celebrate Limited - UK ACTIVE www.Netbet.gr Sports - Casino - Poker

Meridian Gaming Ltd - Malta ACTIVE www.Meridianbet.gr Sports - Casino

Paddy Power PIC - Isle Of Man ACTIVE www.Paddypower.com Sports - Casino - Poker

Magic Services Ltd - Malta ACTIVE www.Bet8.grwww.Interwetten.gr

Sports - CasinoSports - Casino

Kingmaker Limited - Malta ACTIVE www.666bet.com Sports - Casino

YEZ Gaming Limited - Malta ACTIVE www.directslot.gr Casino - Slots

GLB GmbH - Austria ACTIVE www.goalbetint.comwww.7epta7.gr

Sports - Casino - PokerSports - Casino

Online Amusement Solutions Ltd - Malta ACTIVE www.Casinostar777.com Casino - Poker

Online Amusement Solutions NV - Curacao, Netherland Antilles

ACTIVE www.Championsbet.net Sports - Casino

Rebels Gaming Limited- Malta ACTIVE www.Betrebels.gr Sports - Casino - Poker

Eldorado Sportwetten GmbH - Austria ACTIVE www.1x2-bet.grwww.2Winbet.gr

Sports - Casino - PokerSports - Casino - Poker

AS IMG KASIINOD Ltd - Estonia ACTIVE www.grandx.com Casino

Silver Link Limited - Malta INACTIVE    

Cash Point Ltd - Malta INACTIVE    

STS Sportwetten GmbH - Austria INACTIVE    

Doms Cars Ltd - UK INACTIVE  

Online Gambling In Greece - A Market Study

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