The Gambling Industry – A Scapegoat in EU’s Battle Against Tax Evasion
Just recently, the European Commission has come out with the statement that at least $1.6 trillion worth of taxpayers’ assets are held by offshore companies. In other words, this signifies losses in revenue for over $50 billion with every year.
A whopping half of those numbers are contribution of Cyprus and Malta, both countries belonging to the euro currency area.
Both Cyprus and Malta are home to thousands of gambling companies due to the very attractive tax conditions offered.
In 2004, laws related to online gambling were introduced with the Malta Gambling Authority coming to life and these laws ensure both the security and the anonymity of the players, as well as the protection of both the operator and the player. Operators who are issued a valid license by the Maltese authorities can facilitate the following games on their online websites – casino games, lotteries, sports betting, bingo and more.
According to the recent statement from the European Commission, the countries contributing the biggest percentage towards the total amount of wealth held offshore are as below:
Cyprus and Malta – apx. 50% of all taxpayers’ wealth is held abroad
France – apx. 12%
Germany – apx. 10%
Britain – apx. 9%
The EU countries with the largest offshore wealth, in terms of GDP, are Cyprus, Malta, Portugal and Greece, remaining consistently above the average within the EU. Year to year, the ratio of offshore wealth in these countries is above 20%.
Offshore Set-ups and Tax Evasion
Storing money in offshore companies can help taxpayers cut significant amounts of tax and it is easily doable as it is (in most cases) completely legal.
The fact that many gambling companies are registered offshore has also sparked theories in the past that this helps ease the possibility of money laundering through online casinos.
Understandably, the word “offshore” automatically offers the visualisation of a small, tax haven island in the Carribean with weak to none existent supervisory regime, and gambling businesses are often associated with shady, illegal doings. However, this is a misconception as the online gambling industry is very closely monitored by many regulatory bodies worldwide and you can count on the way things are executed to be the same, if not even more transparent than many other profitable industries.
In the cases of companies having offshore branches for seemingly no reason at all, we can surely discuss the matter of tax evasion but this would apply to any business set up in general, regardless of the industry, and it is a major economic issue for governments worldwide.
The Short Break – EU Crisis
During 2007 and 2010, the EU saw a significant decrease in the amount of money held by citizens abroad, but that was mostly due to the financial crisis at the time and rose right back up afterwards, as EU data shows.
As a measure to reduce the issue and be able to narrow down those countries seen as tax havens, the EU has put together a blacklist of countries allowing taxpayers in the EU attractive conditions to set up offshore companies.
The issue here is the very generous criteria defining such countries currently, which has led to this list including only nine, rather small jurisdictions, neither of which in the EU. The list currently contains only small Pacific islands, who don’t really have any financial connections to the EU.
Tax Evasion in the EU vs Tax Evasion Globally
With the current estimate that between 2001 – 2016 each year the EU has lost approximately $50 billion dollars per year amongst its 28 states, the only reasonable guess would be that those numbers will only continue in the same steady rate, if not even increase.
To give some insight on a global level, in 2016 $7.8 trillion euro was held offshore, with €1.5 trillion belonging to EU residents.
In 2016, the US had stored 5% of the country’s taxable money offshore, and in China, approximately 15% of the GDP stored abroad, with numbers being strongly dominated by taxpayers from Hong Kong.
According to reports, said wealth held offshore globally is likely higher than its estimates showed, as this did not include insurance contracts, real estate and cash.