French Government Gambling Tax Issues

The French government recently voiced its opinion over the “serious doubts” the European Commission (EC) has to its current tax regime for internet horse race betting that it is not well-suited to EU law.

The EU stated in its journal on the 14^th of January that the protection given to just one area by means of handicapping competitive conditions to benefit former horse race monopoly PMU is not justified under the current economic EU State Aid rules.

The French government responded in a letter on the 18^th of January stating that it did not believe the current French tax regime perpetuated any economic benefit to the country’s race courses and that it was assigned to a specific sector was not an issue under EC rules.

A formal investigation was launched by the EU last year to ascertain whether the online tax system combined with absolute control and lower tax on land-based products enjoyed by PMU amounted to an unlawful form of State Aid for the country’s racing industry. PMU at presents financially backs 80% of the racing industry; it employs 74,000 people and it has 250 race tracks.

Marcus Charif associate attorney of law firm, Harris Hagan said that the EC is contemplating the State Aid case from an opposite direction to that in Denmark. The EC is investigating a lower tax rate for operators than for land-based casino amounts to State Aid. “It all comes down to ex state monopolies, both PMU and FDJ, having an unfair advantage when it comes to internet gambling, by means of lowered tax rates and a perpetuated monopoly system imposed on land-based products. This in tandem with a planned increased sports right tax is seen by the EC as a State Aid issue.”

State aid that is approved without the EC’s consent is considered to be against the law and may be subject to repayment by the aid recipient. The procedure which was introduced on the 17^th of November 2010 may take up to 18 months to run its course.

The projected sports right levy payable by online gambling operators for offering internet horse race bets has been suspended awaiting the EC’s investigation.