Are operators already giving up on Dutch online gaming licences?

The teething problems that the Dutch parliament has had with the Remote Gaming Bill are well documented – from the initial false start in 2010 to an agonising two-year period of heel-dragging on the current bill, which was eventually approved in the Lower House in July this year. By Imogen Goodman.

But as the legislation awaits approval in the Senate, aspects of the regulations remain controversial in the industry – or, in the words of one high-profile lawyer, a “complete mess”.

According to Bas Jongmans of Gaming Legal Group, concerns over a proposed 29% tax rate and a spate of contradictory regulations in the bill are pushing operators to consider eschewing a Dutch licence for the next few years.

Speaking exclusively to iGaming Business, Jongmans reveals that several operators which had been considering Dutch licenses have instead opted to pursue licences in more liberal jurisdictions such as Malta while the tax rate in the Netherlands remains so high. 

“We have all these large operators commenting on the fact that this tax rate is far too high and saying that they are not going to invest in such a regime with such a high tax rate,” he comments. “In many cases we’ve seen operators actually cease in their attempts to acquire a Dutch licence for the time being.”

‘Excessive’ taxation and regulatory burdens
Jongmans has been one of the most outspoken critics of the proposed online legislation since its inception on July 23, 2014, and his criticisms have been echoed by independent advisors.

Actal, the Dutch advisory board on regulatory burden, entered the debate shortly after the bill was first penned, criticising regulators for placing “unnecessarily high pressure” on businesses and for going far beyond the precedent set by other European countries. 

Pointing out that the land-based gambling sector spent around €58m per year in compliance costs, the advisory board argued there was no need to strengthen the already-tough regulatory measures.

“The ministry does not explain what exactly is the immediate need to reinforce this duty,” stated president Jan ten Hoopen. “The number of problem gamblers has not increased, and we see that other European countries have opted for milder forms of care. We recommend adopting what is common in other European countries and works well.”

Originally, the government proposed an online tax rate of 20%  – a significant step down from the 29% levied on land-based companies – but in response to criticisms of the two-tier system, the online rate was later raised to 29%: an “insane amount”, according to Jongmans.

One of the stated aims of the bill is to try and move to a point where 80% of the Dutch online market is regulated – an aim which regulators have admitted may be thwarted by the high rate of tax.

More recently, another set of amendments to the bill was approved by Dutch Justice Secretary Klaas Dijkhoff, effectively toughening the licensing obligations for operators.

Under the new terms, licensees will be forced to remind players of their deposit limits whenever they log off or switch game, and will be banned from advertising live betting products during a match (except from on their website).

Looking for alternative options
With debates raging over the details of the legislation, the Dutch government looks set to miss out on lucrative gaming tax receipts for some time yet – and the Netherlands’ loss could be Malta’s gain. 

“A lot of operators are now opting to set up a Malta licence, which is a little bit more expensive, but they want to get on board now,” Jongmans reveals. “If, sometime in the next few years, the Dutch government recognises that the tax rate is not working, by the flick of a switch operators could also get into the Dutch market because they are already fully compliant in another region.”

He adds: “We’ve also seen smaller, land-based businesses in Holland that don’t have any experience with online gambling, which are also thinking about moving to Malta to get set up. They want to get in to mobile, because it’s the future – but they’re looking for other options.”

In October, the situation was complicated by the entrance of binary options provider OptionClub into the Dutch market. Represented by Jongmans and Hester Bais of Bais Legal, the options firm managed to secure a licence from the Dutch financial watchdog AFM, paving the way for other binary options providers to become licensed in the same way.

Now, with the precedent set for binary options to be licensed as a financial rather than a gambling product, the similarity of the product to other “games of chance” could cause some headaches for the regulators.

“Why in god’s name would you apply for a gambling licence when we have the whole Act on Financial Supervision in place, and we can force the financial watchdog to provide compliant firms with a licence,” says Jongmans. “Combine this with the fact that with the European passport and the fact that you don’t pay any gaming tax – zero – why, again, would you choose to apply for a gambling licence?”

What’s next for the market?
With an estimated €500m already gambled online each year in the Netherlands, the country could shape up to be a lucrative presence in Europe’s regulated gaming market. At present, however, operators remain tight-lipped about the prospects of securing a decent margin under the proposed licensing terms.

“For obvious reasons the removal of the originally discussed two-tier tax rate in favour of 29% for both online and land-based gambling revenue is far from ideal but we will wait and see how it beds in when it goes live later in 2017,” says Brian Wright, director of business at the Remote Gambling Association (RGA).

“I think it is fair to say it is a positive that under the current proposals, international online gambling operators will not be forced to have a land-based presence of some form within the Netherlands,” he adds. “Furthermore, we are pleased that the legislation will prohibit lotteries and land-based operators from using their existing player databases to promote their online offerings.”

Kindred Group (formerly Unibet), the Europe-facing operator currently licensed in Malta, says it is taking a “wait and see” approach to the current situation in the Netherlands.

“As a listed group we monitor developments in all markets that could be of interest,” says Kindred spokesman Alexander Westrell. “The Netherlands is one of them but it is too soon to make any firm commitments as the law still needs to be voted in the Senate and general elections are coming up.  We welcome the high channelling objective of the Dutch gaming policy to make sure that consumers are protected.”

Kindred CEO Henrik Tjärnström was one of the first industry voices to push for a more competitive tax rate in the country. In a presentation given in Amsterdam shortly after the Remote Gaming Bill was first penned, he outlined his case for 10% rate of tax on gambling products.

Asked if the firm was happy with the 29% rate of tax, Westrell declined to comment.

Meanwhile Erwin van Lambaart, CEO of the state-owned Holland Casino, condemns the delays in moving forward with the Remote Gaming Bill and says the firm remains a “major advocate” of pushing ahead with the online regulation. “The original law was written in 1964,” he says. “The world has changed but our law has not. Dutch consumers have insufficient protection, and having this law in place will help to stop illegal operators. We are a major advocate of market regulation.”

An updated law may now be close to being in place, but in its current incarnation, it seems unlikely to achieve its stated aims of making sure a bigger portion of the Netherlands’ online gaming market takes place in a regulated environment. Perversely, it may have the opposite effect.