PA casino operator Penn National’s interactive chief has criticised the 54% online slots tax in the bill passed by the House and sent to the governor’s desk for signature last night, calling it “the highest rate on the planet” and “completely unworkable”.
Chris Sheffield, SVP/Managing Director Interactive for Penn National, one of the 12 existing land-based casino licensees in line to receive one of the $10m licences to operate poker, slots and table games under the bill now awaiting Governor Tom Wolf’s signature, told iGaming Business:
“Obviously we are pleased that this has finally moved but 54% for online slots is the highest tax rate on the planet. It’s completely unworkable and the only reason one might buy a licence is to then begin an active lobbying effort to reduce the rate to where one might actually make money on the operation.
“We’ve run the numbers many times, and just can’t see how they work given investment in licence fees, setup costs and ongoing costs. I really can’t see anyone making a return unless they are in for the very long term and its likely some early operators will bail out at some stage as has happened in new markets before.”
The president of market development in North America for igaming and social software provider Greentube, Gabriel Cianchetto, echoed Sheffield’s comments, stating that while the bill represented “progress” for PA, the currently proposed 54% tax rate for online slots meant “it could take years for any operation to turn a profit within the state.
“I expect that the smaller Pennsylvania casinos will sit this opportunity out due to the high barrier to entry”, he told iGaming Business.
Cianchetto also called the $10m licensing fee for casinos “a prohibitive amount” for most of the dozen casino properties in the state. “Add to this the $4m licensing fee for technology providers and $1m for content providers and you have a prohibitively large capital expense before you anyone can even begin development”.
He also highlighted that the legislation as currently written required all technology providers such as Greentube to set up a separate infrastructure within the state, “despite the fact that viable infrastructure exists just over the state line in New Jersey.”
“This required replication adds another prohibitively expensive step in what is already a very expensive venture for all parties involved”, he said.
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