The novel COVID-19 virus first got identified in December 2019 in Wuhan, China. It took a little over a month for the World Health Organization to declare the outbreak a Public Health Emergency of International Concern and less than three for this same body to say that we have a global pandemic on our hands. The effects of this novel disease on worldwide economies have been more than dramatic. Per estimates from the International Monetary Fund, the worldwide economy contracted by 4.4% in 2020, the worst decline this organization has noticed since the 1930s and the Great Depression. The only country that notched growth during this tumultuous period was China, whose economy slightly swelled by 2.3% last year.

Naturally, not all industries have been affected in the same way by the COVID-19 virus and the government-issued health measures that came with it. Some have gotten hit way harder than others, and few have even flourished. One sector that thrived during this time of crisis was online gambling. In 2020, it pulled in annual revenues of $64 billion (USD), and now, according to a report posted on ResearchAndMarkets.com, this global market should grow at a rate of 12% per year, reaching annual revenues of $112 billion by 2025.

In the past decade, this industry’s expansion has gotten equally fueled by the rise of blockchain technology and widespread smartphone/internet adoption. However, a factor that currently overshadows these are countries implementing laxer online gambling regulation. That is happening because regions around the globe are looking at this sphere as a new source for sizeable tax revenues that can help them plug budget shortfalls. Hopes are that by allowing sports betting and playing games of chance over the internet, countries can overcome the financial difficulties induced by the global pandemic, a crisis that, for close to two years now, has had the world in its grip.

How Governments Use Tax Revenues

Even before the global pandemic unfolded, local governments have long used gambling as a popular way to fill their coffers. Thus, it is not surprising that most have turned to this method in the face of a recession and subsequent economic downturns. Short-term, there is no doubt that the expansion of gambling activities boasts local economies. Since virtually every type of betting still gets looked at as somewhat of a taboo practice, one that can bring considerable financial and emotional harm, authorities justify its legalization by funnelling the funds earned from it to education and health-related programs.

For example, in Nevada, the US’ premium gambling destination, gaming taxes generated $622 million in the 2020 fiscal year, making this sector the second-largest government contributor next to the hospitality industry. More than one-third of all funding for this state’s public schools comes from the gaming industry, both its land-based and internet side. Pretty much all regions use this same strategy, directing their gaming money primarily to schools. In the US, gaming revenues account for over $27 billion in state and local government revenues. Canadian provinces, like Alberta that have legalized lotteries and different forms of betting, also allocated the money attained via gambling to health care, school transportation, culture programs, highway maintenance, and agricultural development. The same holds for most territories, regardless of country.

How Much Gambling Taxes Do Governments Charge?

It is vital to note that governments can impose taxes for operators concerning their gambling-related revenues/profits and ones for players that have gotten lucky on games of chance or have accurately predicted sporting events. Though the latter is a common practice in many regions, some shy away from it. Such countries include Canada, the UK, Germany, Australia, Sweden, and other territories where this pastime is more mainstream.

In the US, in general, gamblers get taxed around 25% on their winnings in most states. Nevertheless, in New Jersey, this percentage is 3% for gaming and 5% for lottery payouts in the range of $10,000 to $500,000. Nevada charges a 6.75% tax on gross gaming wins. The same rates apply to money earned in the digital sector, where themed slot games generate around 60% to 80% of that sphere’s revenues. Online gambling is far more profitable for operators than running brick-and-mortar establishments because websites do not incur property and sales taxes and alcohol duties on top of gaming ones.

In Europe, operator taxes substantially differ from country to country. In Denmark, the Danish Gambling Authority forces companies in the gambling business to pay from 45%-75% of their gross gaming revenues to the government. In Finland, this percentage is 8.25% on all net profits, while in Germany, gambling-related taxes are a ridiculous 90%. Ireland is a unique case, as the Land of Saints and Scholars implements a system where they tax 1% of all wagers made with operators.

About the Author

Shelly Schiff has been working in the gambling industry since 2009, mainly on the digital side of things, employed by OnlineUnitedStatesCasinos.com. However, over her eleven-year career, Shelly has provided content for many other top interactive gaming websites. She knows all there is to know about slots and has in-depth knowledge of the most popular table games. Her golden retriever Garry occupies most of her leisure time. Though, when she can, she loves reading Jim Thompson-like crime novels.