France’s Gambling Industry Braces for €1.6 Billion Tax Hike

The French government has unveiled plans to increase taxes on the gambling industry, with the aim of boosting social security funding and reducing national debt, the new administration led by Prime Minister Michel Barnier is poised to implement a sweeping tax overhaul that threatens to significantly impact the viability of the country’s gambling operators.

This impending tax raid, estimated to generate an additional €1.6 billion in revenue, is set to have far-reaching consequences across the sector, from land-based casinos and lotteries to online sports betting and poker platforms. The proposed measures, which include hikes in gross gaming revenue (GGR) taxes, restrictions on marketing and advertising, and levies on player bonuses, have sparked widespread concern within the industry.

France’s gambling industry has long been recognized as one of the most heavily taxed in Europe, with operators already contributing over €1.5 billion annually in taxes and social security contributions. The new tax measures threaten to exacerbate this burden, with the sector bracing for a further escalation in its fiscal obligations.

Grégory Rabuel, CEO of Barrière Groupe and President of Casinos de France, has voiced his concerns, stating that the “increase in taxation would worsen an already difficult situation for our sector, which is the most heavily taxed in Europe.” The industry’s current tax contribution, which accounts for a staggering 57% of its gross gaming revenue, is significantly higher than the levels imposed on other economic activities, such as those of tech giants like Google and Amazon.

The proposed tax hikes are expected to have a detrimental impact on the sector’s employment and overall viability. Casinos de France, the trade body representing the country’s 200 land-based casinos, has warned that the measures could jeopardize as many as 45,000 jobs generated by the industry. Furthermore, the planned 10% GGR tax on Paris gaming establishments is described as a “death warrant” that could directly threaten 1,500 jobs.

The French government’s tax overhaul will target various segments of the gambling industry, with some operators facing more significant burdens than others.

Sports betting and horse racing operators are set to bear the brunt of the tax hikes, with the GGR tax on horse racing tote companies slated to rise to 10% for retail bets and 15% for all sports bets. Online bookmakers, such as Betclic, NetBet, and Winamax, are already paying around 55% in GGR taxes, and this figure is expected to climb even further.

The social levy on GGR for lotteries and casinos is poised to increase to 9.2%, calculated on the entire GGR generated, rather than the current method where only 68% of slot machine revenues are taxed. This change will have a significant impact on the profitability of these segments.

The GGR tax on online poker operators is set to rise from the current 0.2% to a more substantial 1%, further squeezing their margins.

Gaming establishments (cercles de jeux) based in Paris, which were previously exempt from social security contributions, will now be required to pay 10% of their GGR as part of the new measures.

The French government acknowledges that the data on the potential impact of these tax increases is limited, but it estimates that the measures could lead to a 5% drop in overall gambling activity.

In the first half of 2024, France’s gambling GGR saw a 3.8% increase to €5.5 billion, with the state-owned lottery operator Française des Jeux (FDJ) reporting a 5.5% rise to €3.5 billion and online sports betting GGR increasing by 10.5% to €1.3 billion. Active player numbers also grew by 13% to 4.3 million during this period.

However, the government’s own projections suggest that the tax hikes could have a detrimental effect on demand, potentially leading to a 5% decline in overall gambling activity. This uncertainty surrounding the impact on consumer behaviour and industry revenues is a significant concern for operators.

The French government has sought to justify the tax hikes by citing the growing prevalence of gambling addiction and its associated social costs.

The government argues that the tax increases are necessary to address the rising number of gamblers and problematic gambling behaviours in recent years. According to the latest available data from 2019, an estimated 1.4 million individuals were at risk of moderate or excessive addiction, with almost 400,000 classified as pathological gamblers.

The additional tax revenue generated from the proposed measures is intended to be channelled towards strengthening the country’s social security apparatus, particularly in the areas of family health and social care provision.

France’s gambling industry has long been subject to a highly regulated environment, with the country’s taxation levels standing out as particularly high compared to its neighbours.

A 2021 report by France’s national auditor, the Cour des Comptes, revealed that the country’s gambling sector paid around €5 billion in taxes and €1 billion in social security contributions in that year. The report also highlighted that France’s tax rates are 20 basis points higher than in neighbouring countries for lotteries and three to 10 points higher for sports and horse racing betting.

In addition to the heavy tax burden, France’s gambling industry operates under a more stringent regulatory framework than many other European markets. This includes restrictions on advertising, player protection measures, and limits on the number of licensed operators, all of which contribute to the sector’s challenging operating environment.