How big of a part is the gambling industry when talking tax evasion?

The European commission has recently released a statement, in which they break down the numbers when it comes to the actual financial loss due to tax evasion. The numbers are more than significant – at least $1.6 trillion in tax money within the EU is stored offshore.

If we take the numbers which show the contribution to tax evasion by countries – Cyprus and Malta – 50%, followed by France and Germany in the 10-15% range and Britain with approximately 9% contribution.

When talking GDP, the EU countries who store offshore the largest financial amounts are Cyprus, Malta, Portugal and Greece. On a yearly basis those countries continue to stay at an average of 20% which is certainly more than the averagely calculated amongst other EU parties.

Gambling – The Portion Of The Economy It Represents

Out of the $1,6 trillion in mention, it is safe to assume that 50% is contributed to by Malta and Cyprus. What those countries have in common? They host the largest numbers of gaming companies in Europe. The reason behind this is precisely the beneficial tax rates offered by the countries’ governments.

Both countries hold their own gambling license, however most companies opt for the one offered by the Malta Gamling Authority (MGA) who began granting licenses in 2004. The operators who are granted a license by the Maltese authorities are legally allowed to offer casino, lottery and bingo games, as well as sports betting.

In Malta, the gambling sector amounts to over €1.2 billion, or over 12% of the local GDP.

Panama Papers

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 concept of reducing tax by setting up off-shore companies is not really anything new, but the reason why it is so widely discussed is that for many years things were kept under wraps.

Until 2015. In 2015, an anonymous source leaked 11.5 million documents detailing financial and attorney-client information for hundreds of thousands of offshore entities. Proof in the leaked documents dated all the way back to the 70s, giving us a clear idea of just how long tax evasion has been at this level.

The source who leaked the Panama Papers is still anonymous to this day.

The Gambling Industry & Its Offshore SetUps – Tax Evasion, Money Laundering or both?

The gambling industry is a highly profitable industry and when talking about tax, a company paying 20-40% of its profit in tax is indeed a lot of money. Holding funds offshore allows companies to reduce their tax due thanks to tax plans designed for foreign companies in counties, like Malta for example.

The Short-Lived Period of Relief

Europe took a small turn for the better during the EU crisis in the late 2000s and unsurprisingly rose right back up once the financial economy across the EU stabilized.

Coming to the realization of how big the issue and its impact actually is, in one of their many measures to battle the problem the EU created a blacklist of all the counties considered tax haven.

Small island countries in the Pacific Ocean are the main participants in this blacklist and funnily enough, there is little to no actual financial connection between those countries and the EU.

Europe vs Rest Of The World

In the last 3 decades, the EU’s loss due to tax evasion is estimated to approximately €50 billion each and every year.

The Panama Papers scandal shook the otherwise all so tidy and perfect European Union to its core but the issue with tax evasion most definitely does not only happen behind the EU’s closed doors.

To put things in perspective, in 2016 approximately $8 trillion in tax payers’ money was held offshore and a mere $1.5 trillion was coming from tax payers within the EU.

Here in the United States a significant 5% of taxable money was stored offshore in 2016 but it gets much worse in other countries, like China, where the number is a whopping 15%, mostly doing of Hong Kong residents.

In conclusion to the mindblowing digits which we tried to break down for you above, it is important to keep in mind that a likely significant portion is not even accounted for – most likely funds related to real estate, insurance contracts and cash money which are not included in the official calculations.