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Holland: igaming regulation on track for early 2017

| By iGB Editorial Team
Issues remain on the road to implementing the Dutch regulatory regime, including the headline tax rate, but for Alan Littler and Justin Franssen of Kalff Katz & Franssen, legislators' desire to legislate rather than procrastinate means igaming licensing remains on track to commence early 2017.

Issues remain on the road to implementing the Dutch regulatory regime, including the headline tax rate, but for Alan Littler and Justin Franssen of Kalff Katz & Franssen, legislators' desire to legislate rather than procrastinate means igaming licensing remains on track to commence early 2017.

Alan Littler and Justin Franssen

The industry has been holding its collective breath for a long time while it waits for real movement on the remote gaming bill in Holland. This bill will amend the Wet op de kansspelen of 1964 so as to enable the licensing of remote gaming.

In July 2014, the government submitted a revised version of the bill to parliament, yet despite action within the relevant parliamentary committee and numerous parliamentary questions on related issues, a plenary debate within the lower house has yet to take place.

Yet this milestone is in sight; the plenary debate on the bill is expected to take place between February and April this year.

In our previous article for iGaming Business in May/June 2015 (Issue 92), we noted how the State Secretary of Security and Justice had provided his Ministry’s written response to a substantial amount of written questions from the parliamentary committee handling this bill.

As flagged, a parliamentary roundtable hearing took place on 21 May 2015. Instead of tabling the bill for a plenary debate, the committee decided to issue a second set of written questions, raising concerns following the State Secretary’s response to their first batch.

This second set was published in July 2015, and the State Secretary responded in December 2015 just ahead of the Christmas recess. Not even a week into the New Year, and two amendments to the remote gaming bill were proposed, on the contentious issue of taxation.

This is a matter we flagged previously as being one which could prove problematic. More about this later.

Another issue which will undoubtedly shape the remote gaming market is the merger of the ‘state lottery’, the Staatsloterij (State Lottery) and De Lotto. The latter of enjoys exclusive licences for sports betting, lotto and the instant lottery.

Existing licences do not permit the two operators to offer remote gaming, but De Lotto’s online presence, via the so-called ‘e-commerce’ route, is increasingly akin to a remote offer in all but name.

In essence, the merger is a takeover of De Lotto by the Staatsloterij. Quite remarkably therefore De Lotto will be taken over by the Dutch state.

This amounts to a head-on collision with the government’s own stance on the state casino monopoly, Holland Casino, which is that it should be privatised because the provision of gambling is not a task for the state.

Early December 2015 saw the Dutch competition authority approve the merger. Given that it involves a state entity, parliament will have a say on whether the merger goes ahead. Realistically it is unlikely that the merger will not proceed.

The December 2015 response of the State Secretary overwhelmingly adhered to the Ministry’s established position on the contents of the bill. In terms of awarding remote gaming licences, the Gaming Authority will enjoy a wide margin of discretion when assessing the reliability of an applicant.

Those who have been fined by the Authority for offering their services in the Netherlands in breach of the prioritisation criteria will, according to this response, not acquire a licence.

Otherwise persisting in offering services in the Netherlands but without having been fined, i.e. offering services in breach of the prioritisation criteria in the absence of a sanction from the Authority, will also see an application be declined.

The suggestion was also made that operators who have been present on the market will have to pay some sort of financial sanction in order for their licence to be awarded; this would seem to be a fine of a different nature than that applicable to operators breaching the prioritisation criteria.

Reference to this was brief, and details scarce. How this will materialise in practice and how the overall licensing process will look remain to be seen; secondary legislation regarding the process is still pending publication.

The State Secretary also responded to the suggestion advanced during the aforementioned roundtable parliamentary for an ‘alternative regulatory approach’ advanced by the ‘Goede Doelen Platform’, which represents the beneficiaries of the charity lotteries and De Lotto. 

Essentially the approach entailed a cap on the number of remote gaming licences and preferential treatment for the land-based incumbents. Such ideas were dismissed as being unnecessary, extremely vulnerable in light of EU law and in response to claims that the approach could be based upon the precautionary principle, the State Secretary noted that the principle does not allow for ‘disguised protectionism’.

The State Secretary’s response also noted that the approach seemed to be motivated by economic considerations, i.e. the protection of revenues for good causes, a motivation which does not form an objective justification for restrictive measures under EU law.

Amongst other observations, difficulties in Germany concerning the award of 20 sports-betting licences in Hesse were referred to as part of the reasoning against a cap on the number of licences.

Regarding other regulatory topics, despite opposition to the use of bonuses in some political quarters, the State Secretary noted that they will be permitted subject to strict conditions, including that they cannot be tailored according to individual player behaviour.

Gambling via (interactive) television was another contentious point; it remains the State Secretary’s intention that it will be permitted between the hours of 11pm and 6am. Given the need to fully comply with all regulatory requirements, interaction between operators and players via another device will be necessary.

Change however seems to be afoot in terms of player identification, with the requirement that players provide a copy of their ID appearing as if it will be replaced with an electronic identification system.

This will run via the Gaming Authority and also enable the necessary cross-check with the central exclusion database to be made. 

Returning to taxation, the remote gaming bill proposes introducing a tax rate of 20% GGR for remote gaming whilst maintaining the current 29% for land-based activities.

In December 2015 the State Secretary noted that he was not opposed to a uniform rate per se, but that one of 20% would result in a budgetary shortfall. In no uncertain terms he pointed out that any tax rate above 20% would undermine the channelization objective: to channel demand to locally licensed operators who uphold national high consumer protection standards.

The objective is for operators licensed by the Gaming Authority to capture 80% of the market. Consumer protection via channelization is, on paper at least, the raison d’être of the bill.

With a tax rate of 24%, the State Secretary noted that channelization would reach 60%, reaching 70% after four years. Notwithstanding this, two amendments were tabled on 4 January 2016; one proposing a uniform rate of taxation at 29%.

It should be noted: while 29% is a uniform headline rate of taxation, given that all incumbents except Holland Casino and the slot machine sector do not pay any tax on prizes with a value less than €449, considerable discrepancies exist in terms of the effective tax burden. This is likely to amount to state aid.

Secondly, the other amendment proposes that within three years of the regime having entered into force, the Minister of Finance should propose a reduction in the uniform tax rate of up 4% points should the market size – of both the land-based and remote sectors combined – fund a reduction in the tax rate.

However, 29% is a hefty toll to pay to enter the market and endangers the success of the entire process and thus securing the protection of consumers according to national standards and preferences.

Generation of taxation revenues would appear to prevail over consumer protection objectives.

It remains to be seen how the situation will play out; seeking to generate revenues from remote gaming, whether offered by new market entrants or domestic incumbents, should not undermine the consumer protection objective central to the bill.

Notwithstanding these developments, there appears to be a desire to legislate rather than procrastinate. Should the plenary debate take place this February to April, and following approval of the bill by the upper house, licensing is currently on track to commence in early 2017.

Relared articles: Privacy implications of the Dutch Remote Gambling Act
Holland igaming bill: second half of 2015 will be a key period
Interview: Eric Olders, chief executive, JVH Gaming

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