In my previous post (The tangle of the “una tantum” on gambling) I said Minister Delrio at first nourished and later deluded the hope of the mayors to avoid to charge to citizens the so called mini-IMU tax. Now he has adopted the proposal of his PD party colleague senator Bobba, that says: “let us align the tax rates of games”. It seems the Minister declared to daily newspaper Secolo XIX: “raising the VLT’s tax rate to the same level as AWP we can get a tax income increase equal to around 1.8 billion euros”. In Bobba and Delrio opinion VLT tax rate should be raised from current 5% on turnover to 12,7%. I suppose they imagine a proportional alignment of VLT payout that is currently around 90% of turnover.
It is true that tax rates of Italian gambling seem like a Babel tower, but before to change them it would be wise to deep possible reasons for those differences. In general, tax rates are much different because games are much different, but VLT and AWP are both slots, i.e. rather similar games. Nevertheless there are many reasons that contribute to explain different payout and tax rate. I want to mention en passant number and spread of machines on the territory and the different minimum amount per spin (no limit in AWP, equal to 0.50 euro in VLT). But the fundamental reason that explains the wide gap between VLT and AWP payouts (around 90% vs 74%) and tax rates is that “turnover” to which is applied the tax rate for VLT is not the same “turnover” to which is applied the tax rate for AWP.
With reference to VLT taxation, turnover is the amount bet, i.e. tax rate is applied to the amount bet each time the player press the spin button. Turnover for AWP taxation is instead the so-called coin-in, i.e. the tax rate is applied to the amount inserted in the slot of the machine. Is that different? Yes of course it is much different! AWP winning is accumulated on a counter and can be played again till the player requests to withdraw and coins are then downloaded. Player usually does that when he/she wins a relevant amount and want to cash-out. Bet from winning re-played does not imply coin-in and consequently are not taxed. To be choosy, I notice that VLT can offer to the player free spins that are not taxed, but the impact on payout is not comparable. In conclusion the perceived payout of AWP, that is the true payout, is much higher than the theoretical 74%. It must be highlighted AWPs are hosted in bingo halls and betting shops close to VLTs and had not been cannibalised, despite player is able to feel immediately even a change of half point of payout. Ask a player. He/she would say tax rates of AWP and VLT are not at all much different. Current tax rates of AWP and VLT are already well balanced.
I hope there will not be now any Dr Strangelove that says: then let us tax AWP on the bet amount instead of on the coin-in. At best, should demand be inelastic, players proportionally would reduce gambling volume, making invariant spending and consequently tax income for the State. But probably the elasticity ratio is much higher than 1. There would be a reduction of volume much more than proportional because the game would burn too fast the amount the player can spend. The AWP would become unplayable, like it would become VLT in the event of a noticeably reduction of its payout.
Politicians involved on gambling legislation must be aware they need to deeply know how it works. I have sometime the unpleasant feeling, both as a gambling operator and a citizen, to be lying on an operating table in the hands of a surgeon that had not even opened a book of anatomy.
