“But in this world nothing can be said to be certain except death and taxes,” Benjamin Franklin once wrote in a letter to a good friend from France.

The responsible official of Saxony-Anhalt might have had this saying in mind when forging an alliance in the Federal Council of Germany, the representation of all federal states at federal level, against the federal state Schleswig-Holstein. Schleswig-Holstein has been resisting political pressure from the rest of the states to join their draft Interstate Treaty on Gambling, not agreeing with major restrictions to be imposed on the online gaming industry by this treaty.

Northernmost state Schleswig-Holstein upheld its “nein” (i.e. “no”) to the draft Interstate Treaty during the conference of all Prime Ministers of the federal states, held on December 15, 2011, in Berlin. At the end of last year, eastern state Saxony-Anhalt introduced a “bill on the taxation of sports betting” into the Federal Council, apparently aimed at torpedoing the more competitive tax regime of Schleswig-Holstein’s Gambling Act. In the event that the Federal Parliament adopts this bill, it can be said to be certain – to speak with Benjamin Franklin – that federal taxes on sports betting will supersede Schleswig-Holstein’s betting taxation.

European Commission could sink draft interstate treaty again

The draft Interstate Treaty finally agreed on during said conference in mid-December provides for a market opening in sports betting under a so-called “experimental clause” – although this opening would not be more than a door crack, given the limitation to a total number of 20 concessions for private operators.

Following the objections of the European Commission in their detailed opinion of July 18, 2011, intended taxation of sports betting was reduced from the initial 16.66 per cent on stakes to five per cent on stakes. However, such turnover-based taxation might not allow economically viable operations of online bookmakers, considering the low margins and tough competition in the market for online sports betting.

This report can be read in full in the Spring 2012 issue of European Gaming Lawyer