Channelling and taxation in European online gambling markets: evolution and policy implications.

BACKGROUND

Taxation can be used to direct consumption and provision of harmful commodities. Prior research on gambling taxation has nevertheless been inconclusive on whether this can also apply to gambling. In gambling policy, optimal taxation rates have particularly been debated from the perspective of channelling consumption from offshore markets to regulated markets. Prior industry-sponsored reports have suggested that lower tax rates may be correlated with higher channelling rates.

METHODS

We analyse data on two cross-sections (2018; 2021) derived from 29 European countries. The data consist of estimated channelling rates, information on taxation levels, and controls including blocking policies. We produce a descriptive overview of the recent evolution of market channelling and taxation for online gambling products across Europe. We also produce a multivariate regression analysis on the extent that market channelling is correlated with taxation of online gambling.

RESULTS

Our results show important divergence in taxation of online gambling markets in Europe. We also found that over time, the market share of offshore markets has declined in relative terms. However, this decline is explained by a more rapid growth in the regulated market in absolute terms. The regression analysis found no evidence of a negative correlation between that taxation rates and channelling rates within Europe.

CONCLUSIONS

Gambling policy needs to be based on empirical, impartial evidence. Misleading estimates may result in increased harms to societies. Channelling objectives are important for better regulation and harm reduction, but taxation levels do not appear to be correlated to the success of channelling policies.