Part 1: Italy – revolting populism
will be looking at the advertising and marketing €130m, or around 20% of the EBITDA generated
ban as an opportunity to thrive outside of the from Italy.
regulatory system are reasonably high. Whether
the combined authorities in Italy are in a position Not so fast
to truly tackle that is open to question. Yet the Regulus team questioned whether the
government would hit its €770m tax revenue
A tax question target. Pointing to the changes to player payout
The advertising and marketing ban is far from announced, the team noted that data from
the end of the bad news for the gambling sector Agimeg suggested that while AWPs are running
in Italy. The tax rises unveiled on Christmas Eve at their minimum payout limit of 70%, moving
were across the board and the government down to 68% under the new rules, VLTs are “on
hopes these will raise an additional €770m from the whole more generous than the law demands”,
the sector this year. Moreover, the hit will be actually paying out 88% compared to the legal
immediate as the changes were part of a budget limit of 85% (which itself has now moved to 84%).
that was waved through immediately by the “That gives operators a lot more mitigation room,”
European Commission (see Table 1). they said.
Table 1: Italian tax rises of VLTs, combined with the fact that the duty falls
“Given the high payout, recycling-driven nature
Product
on turnover, there is a strong possibility, in our
Previous
tax rate
(%) New tax
rate (%) Slot machines 19.25 20.6* (caveat: customers may start to become less
VLTs 6.75 7.5* interested), while the AWP element is likely to
Land-based sports betting 18 20 Online sports betting 22 24 Virtual sports 20 22 has concentrated its fire on “the wrong metric” of
Online casino, poker and
bingo 20 25 turnover rather than revenue, with the potential that
view, that the VLT element of the tax can be more
than mitigated by dropping the payout materially
* Further tax rises apply
in May
result in a slightly higher tax yield for a small(ish)
net revenue hit.”
Regulus suggested that the Italian government
demand will slow for a demonstrably less enticing
product. If operators “mitigate aggressively”, then
the tax take will be lower than expected.
Should this happen, the Italian government
The news brought an immediate response could be expected to “get more punitive”, a
from companies with an exposure to the Italian stance which it has not been shy of adopting with
market. Playtech issued an unseasonal pre- other areas of public policy. This could have even
Christmas statement to the stock exchange more of an impact on the online sector.
that said it expected the measures to reduce
As it stands, as Regulus pointed out, by
its 2019 adjusted EBITDA by approximately €20- enacting a ban on advertising, the government
25m before any mitigating actions. has effectively given operators the margin
Meanwhile, the Italian-listed Gamenet, the
headroom to pay higher taxes. Moreover, with
company behind Goldbet, similarly told the the potential for the machine sector to come up
market it anticipated a hit to EBITDA of between severely short in tax revenue terms, the question
€15-20m, mainly due to the changes with regard then becomes: where is the revenue going to
to AWPs and VLTs. come from?
Analysts at Regulus Partners, meanwhile,
estimated that the hit to IGT would be circa
iGaming Business Market Monitor • February 2019
“On the current government trajectory, 2018
may be seen as closing over a decade of benign
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