June 1, 2012

Spain Awards Online Gaming Licenses to Raise Tax Revenue

Peter Suciu for RedOrbit.com

Given the continued economic certainty in Spain it shouldn´t be a surprise that the eurozone country is looking to make a bit of a gamble. This week the country awarded online gaming licenses to companies that include Bwin.party digital and Sportingbet.

This has been widely seen as a move to help raise tax revenue, while also removing regulatory uncertainly that has been hanging over the operators. Currently, as many as 59 firms have applied to operate in the cash-strapped country, and those awarded licenses will pay taxes at a rate of 25 percent of gross gaming revenue.

This move comes as Spain has seen it manufacturing sector face conditions that are worse than what Greece has experienced. According to Markit´s eurozone manufacturing manager´s index, the entire eurozone dropped from 45.1 to 44.9 in April, while Spain´s figure was at 42.0 — below even the Greek level of 43.1.

Additionally eurozone unemployment has remained at a record 11 percent, while Spain — along with neighboring Portugal and Greece — are facing rising unemployment, with Spain hitting 24.3 percent, the worst rate in the entire EU.

Spain´s gamble on online gaming could be seen as a risky bet indded.

Online gaming remains dominated by mostly foreign players in Spain, which is why Spanish companies such as Codere are now set to enter the market. What makes this move unique too is that Spain, unlike other markets, is not setting limits on the number of licenses it will award. While 59 companies have applied, only a fraction have are likely to be turned down for not meeting all the requirements.

In part this is because the London-based firms such as Sportingbet and Bwin.party digital are already active in Spain´s unregulated market.

“The sector is on fire, and it looks like if you are not online, there is no future. But we will have to see who makes it through, because online businesses can be expensive to get off the ground. The business is based on marketing,” Fernando Henar, president of CEJ, a Spanish organization for bingo companies, told Reuters earlier this week.

Will Hill, the United Kingdom´s biggest bookmaker, along with online gaming company 888 are among the companies that have already been granted licenses.

And although the nation has high unemployment and deteriorating manufacturing sector  it is still a dominant power in major sports, and this in turn could be a way for the country to see tax revenues come in. While the number of licenses in Spain could offer competition, it could help fill the tax coffers as each operator will pay roughly a quarter of gross revenue.

The Spanish regulators expect to see 800 million euros in 2014, according to gaming association Jdigital.

For now the betting money is on who is granted a license. The Spanish Treasury noted that it was informing companies of the outcome of their license applications this week, but would not release the full list of who had been granted a license until next week when sites go live.

Whether this is a winner for the beleaguered nation is something left to a betting man.