Can internet gambling save Spain?

Guest post by Jimmy Kane

A good income stream for Spain's government?
A good income stream for Spain’s government?

Internet gambling may have been made illegal in The United States, but Spain is set to rock the world with their own legalised version of internet gambling this week. The aim is to capture much-needed tax income as newly licensed firms duke it out to grab the country’s growing audience of online poker and sports betting fans.

Seeing as Spain is so heavily indebted, it’s a smart move for the government, who will award licenses to internet betting operators for the first time on Friday. The revenue stream is estimated to be over 800 million euros (approximately $1 billion) in 2014, according to the international gaming association Jdigital.

The transition won’t be without some competition – foreign players have dominated online gaming in the past. Companies like betting giant Codere are only now set to enter the frenzy.

Unlike some other licensed markets, Spain has yet to set a limit on the amount of licenses it will award. So far, more than 59 companies have applied – of that group, only a small handful who have not met every single requirement are likely to be turned down.

“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,” said Fernando Henar, who is president of CEJ, a Spanish organization for bingo companies.

London-listed firms Sportingbet and Bwin.party digital are already active in Spain’s unregulated market, making them main contenders along with Ladbrokes, 888 and Betfair. However, most online gambling will not attract taxes on individual bets, so that means firms will instead face a gross profit tax which wavers between 10 and 15 percent.

This may be good news for Spain as the country’s outgoing central bank chief warned on Wednesday that Spain’s tax income may fall short, even as it wrestles to fund a deficit of 52 billion euros and refinance 98 billion euros of debt. Ouch.

The amount of taxes raised by online betting just pales in comparison, but it’s nonetheless a useful source of income. Keep in mind that Spain’s gambling sector as a whole has almost quadrupled from 7 billion euros in 2008 to 27.3 billion in 2010.

Other legalized markets in a gray area may also interest Spain. Perhaps legalizing brothels will bring in the same kind of tax attention, as well as opening up so-called “coffee shops” now that The Netherlands has closed these cannabis loving facilities to tourists.

Jimmy Kane is an avid traveler and Spanish real estate hobbyist. When he’s not traveling or studying the Spanish property market, he maintains a telecommunications website called Cable in Dallas, Texas.

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