Taxing Online Gambling – Why emerging economies must regulate

Online gambling is a growing industry and a lot of people from emerging countries play casino games online. Countries will benefit from taxing this activity

The size of the global online gambling market was a ‘mere’ $24.3 billion in 2009. It rose to $35.52 in 2015 and the estimated size for 2018 is $56 billion. That’s more than 100% growth in just 9 years. There are several reasons for this trend. First of all, a lot of people stopped gambling at land-based casinos and switched mostly or even completely to online gambling. It is a lot more convenient and easier to play casino games online and a lot of operators offer better pay-outs online. Many online casinos try and entice people with no deposit bonuses.

The growing trend is obvious and a lot of companies will profit from it. Moreover, whilst in the past online casinos targeted only people in developed countries, primarily UK, Australia, Canada, Europe and to a certain degree United States (due to their more restrictive laws), nowadays a lot of people from emerging countries play casino games online and operators realised that there’s a lot of money to be made there. Experts think that Africa has a lot of potential as an emerging iGaming market.

There is a Middle Way

Some of the emerging countries have quite strict gambling laws, i.e. online gambling is practically forbidden, whereas in others this growing market is completely unregulated. We believe that both of these approaches are wrong and that the economy of an emerging country such as Nigeria could benefit from a more balanced approach. When online gambling is forbidden, or completely limited and there are only few games and few casinos available, people look elsewhere and put their money in foreign operated casinos, even if it is illegal, because the chances of getting caught are relatively small. Even if the person gets caught, the state wouldn’t benefit significantly from the fine that is imposed on the player and sending someone to jail costs money.

Therefore, restrictive gambling laws and online gambling made illegal won’t benefit a country’s economy. If the area is unregulated, again, casinos operating from outside the country would target players, they’ll take their money there, but the state will see no benefit, both from the money their citizens spend and the ones that they earned. Therefore, we advocate for a middle way. Countries should allow their citizens to gamble online, but all tax revenues should go to the country’s budget, instead of leaving this unregulated. Casinos would still offer their services to players from emerging countries such as Nigeria, because there’s a lot of money to be made, since the market is growing.

The Case of UK

There is an interesting example, of a country which is not an emerging economy but a developed country which is still very indicative. The country in question is UK. Britons enjoy gambling online and the online gambling market in the country is quite large. Being part of the EU means that a company that operates anywhere in the EU is allowed to operate within the UK and offer its services to UK players. Casino operators from countries that have a lot more liberal laws concerning online gambling and lower corporate tax, benefited from this.

This hurt the economy of the country, as parts of the disposable incomes of numerous British citizens were spent elsewhere and therefore not a single penny from that money went to the state budget. Therefore the government decided that if an operator wants to offer services to UK citizens, then it would have to register and receive a licence from the UK Gambling Commission. That way, online gambling is still legal and players can even register on websites whose operators are based elsewhere as long as taxes are paid in Britain. This is to the benefit of online casino fans, as they get to choose from a wider range of operators, but it also benefits the state as a lot of tax revenues flow into the state budget. UK’s betting and gaming tax revenues were increased by more than £400 million after the new measures were introduced.