Rep. Jim McDermott (D-WA) on Thursday introduced in the House of Representatives “The Internet Gambling Regulation and Tax Enforcement Act of 2013,” which would create a 12 percent deposit tax paid by licensed operators, not players. Under McDermott’s proposal, the federal government would collect 4 percent of the tax, while qualified states and tribes that participate in the federal regime would receive 8 percent.
The online gambling tax payable to states and tribes would be dependent upon the location of the customer in the respective qualified state or tribal area at the time the customer makes a deposit. This is consistent, McDermott’s representatives point out, with the point of consumption tax methodology being implemented in the UK. The bill has the backing of The Safe and Secure Internet Gambling Initiative, which calls it “a sensible approach to collect much-needed new revenue for federal and state budgets.”
“With all of the fighting in DC over funding issues, you’d hope this opportunity to generate billions in economic activity and new government revenues will get serious consideration, not to mention the many new jobs that would be created. With the pending Internet gambling bills, Congress can put in place broad consumer protections and capture significant new government revenues without having to raise taxes,” said Michael Waxman, spokesperson for the Safe and Secure Internet Gambling Initiative.
“It’s shocking that Congress has decided to leave in place hypocritical laws that allow some forms of online gambling activity, such as betting on horse racing, but prohibits others, like poker and bingo. You’d be hard pressed to find another industry pleading for a chance to offer online the same activities permissible offline, and be taxed fairly to do so.”
The position of the Initiative is that rather than using the complicated Gross Gaming Revenues (GGR) methodology as a basis for tax calculations in a multi-jurisdiction environment, a deposit tax would be optimal for the Internet gambling market. A deposit tax – paid up-front – creates transparency, the Initiative says, and readily supports revenue calculation and distribution across multiple jurisdictions based on a place of consumption methodology.
The expansion of Internet gambling is projected by 2023 to generate upwards of $9.3 billion in revenue, the same amount of revenue as generated by Las Vegas and Atlantic City markets combined today, according to Morgan Stanley. Since the Department of Justice’s opinion in late 2011 that Internet gambling activity is not prohibited under federal law unless it involves sports, three states (Nevada, Delaware, and New Jersey) have moved to offer intrastate Internet gambling, with other states eager to follow suit. Already there is discussion of interstate compacts which would effectively mirror a fragmented federal regime – if ever agreement could be reached on the finer detail – but with duplicate costs in participating states.
To date, each state has approved varying offerings, suitability criteria, consumer protections and tax structures.
This is a reprint from blog.northjersey.com. To view the original, click here.
