The Italian government is planning to increase taxes on gaming machines and crack down on illegal gambling operations.

This coalition government came to power in 2018 and is very anti-gambling in its attitude. It believes that gambling has too many negative social consequences and that it is not a good idea for Italians to be regularly gambling.

It is already bringing in a ban on gambling advertising and sponsorships and has many other plans to restrict the sector even further.

As per its budget proposals for 2019, the government is planning to increase the tax rates for video lottery terminals and slot machines.

This budget proposal has been heavily criticized by the European Commission, which wants the Italian government to find better ways to raise funds to meet its deficit.

The government’s plan is to offset the revenues lost through the advertising ban by hiking the taxes on gaming machines.

It is forecasting an annual loss in VAT from the ban of $226m by 2020. The government is planning to increase the slot machine rate by 0.25% to 19.25% and bring the video lottery terminals tax to 6.25%. There will be a further 0.25% hike for each of these taxes in May 2019.

This hike in the tax rate for gambling machines will further dilute the market for operators. They can no longer properly advertise their offerings, which will naturally decrease their revenues. Tax hikes will then further erode their earnings, which will drive many operators out of the sector.

The advertising ban

A blanket ban on all gambling ads being shown to Italian residents is set to come into play on 1 January 2019, but many advertising platforms such as Google are already complying.

The government also is banning gambling companies from sponsoring sports teams and competitions, which is a major source of revenue for these parties. Removing sponsorships from gambling operators is likely to financially cripple many of them and they will struggle to obtain significant sponsorship elsewhere.

Some Italian football clubs are already struggling to meet UEFA’s financial fair play standards as it is, which will only become worse as this sponsorship comes into effect. There is a six-month grace period for teams to find new sponsors before the ban comes into effect.

Reaction from the sector

Operators have expressed much outrage regarding the advertising ban. They will struggle to attract new customers and stand out from their competitors. Many of the opposition parties are not happy, as many of their members have business interests in the gambling space.

Both the operators and the state are likely to see a constant decrease in gambling revenues. The sports betting sector saw a surprising decline during October.

Most nations are seeing great upticks in their sports betting revenues in 2018, largely thanks to the FIFA World Cup. France, for example, saw revenue increases of 92% in Q3 for sports betting in comparison to the same period in 2017.

Italian figures show both offline and online sports betting revenues decreased in October, falling by 26% in comparison with the same month in 2017, with online revenues falling by 21.2% and offline revenues falling by 29%.

Some people are blaming these poor revenues on punters’ favorable football results. However, the the government’s anti-gambling stance is not helping matters.

Despite its negative attitude, state revenues from gambling taxes are up 4% so far in 2018, to almost $12.4bn. With the tax on gaming machines increasing and further gambling tax hikes set for May 2019, this is still a good source of revenue for the state.

Clamping down on illegal operations

Another area the government is focusing on is getting to grips with the illegal sector, which does not pay any tax revenues to the state. For the government there is no upside in allowing illegal operators to continue their business.

Police arrested many people in relation to illegal gambling rings during November. On 14 November, for example, 68 people were arrested and assets worth more than $1bn seized.

This gambling ring in Catania, Bari and Reggio Calabria handles about $4.5bn worth of bets. A number of website domains were named as part of this investigation, including Futurebet, Revolutionbet, Betworld365, Betcom, CenturionBet and ParadiseBet.

The Italian deputy premier, Luigi Di Maio, is leading the crackdown in the gambling sector. He acknowledged these arrests, saying that the sector is a “fertile ground for the mafias, to obtain easy earnings and laundering dirty money.” He is committed to further crackdowns.