Italy: The COVID-19 sports tax on betting By Valérie Peano, partner at European Gambling Lawyers & Advisors November 4, 2020 at 7:40 pm Last May, a Law Decree was introduced by the Italian government for COVID-19 emergency measures to sustain economic and financial activities. The “Relaunch” by Parliament in July confirmed its entry into force in May. Against all odds, this Law Decree introduced an additional tax to help sustain sports after the two-month closure for the health-emergency lockdown and the subsequent lack of sporting events to bet on for the licensed online bookmakers. In order to finance this newly introduced sports fund, the provision targets sports betting by all licensed operators, in whatever form and modalities, including virtual betting. It collects an additional 0.5% tax, tacked on to the current sports betting tax, through 31 December 2021, capped at €40 million for 2020 and €50 million for 2021. To put things into context, a similar proposal was raised two years ago by the appointed Italian Football Federation chairman, who claimed that sports betting should directly fund football, like it does in the French betting system. It could be thus argued that the origin of the COVID-19 sports tax was in the works long before the lockdown and has been readapted by the current Ministry of Sports as an exceptional two-year contribution to sustain sports entities seriously affected by the health emergency. Indeed, the Ministry for Sports has already issued guidelines for the distribution of the additional funds collected by the Relaunch Law Decree. In the past weeks, the Italian gambling regulator ADM has provided the licensed operators with its roll-out notice. Though it aimed to clarify how to apply this additional tax, it has raised a number of questions. First, horse betting operators must pay the additional tax that funds sports, but not the horse sector. This has raised Parliamentary questions and formal opposition from the Ministry of Agriculture Undersecretary, who is in charge of the redistribution of taxes on horse betting to the horse-racing industry. Secondly, the ADM notice includes virtual betting, without any instructions about including only those virtual bets based on virtual or live sporting events. Above all, the notice states that this additional tax is based on the “betting turnover less the applicable tax,” which could be a questionable interpretation to be raised before the relevant Court. One of the most relevant issues deriving from this questionable interpretation is the COVID-19 sports tax calculation for betting exchanges. In this peculiar case, the Italian gambling regulator established that the additional tax shall apply on the “summation of all amounts matches between lays and bets, deducted the betting tax“, therefore apparently not taking into consideration that the betting exchange retains its commission on the bettors’ winnings and not on such summation. More specifically, the ADM note provides further details, stating that only for betting exchanges, this additional taxation shall be deducted on the exchange bettors’ winnings starting in May 2020. This leads us to two further comments. The first is that the COVID-19 sports tax calculation applies retroactively, without regard to the consumer-protection cornerstone principle that the bettor should be made aware of his or her potential winnings, minus any deduction, before betting. And what if the bettor challenges the request of payment of this tax? The second is that it introduces an unclear and presumably unjustified differentiation among the targeted sports betting products. For betting exchanges only, and not for fixed-odds sports betting and virtual betting operators, the additional taxation amount can be deducted from the bettors’ winnings. The COVID-19 additional sports-fund tax payments are to be made quarterly according to the following deadlines: 20 May 2020 – 31 August 2020: within 30 November 2020; 1 September 2020 – 31 December 2020: within 28 February 2021; 1 January 2021 – 30 April 2021: within 31 August 2021; 1 May 2021 – 31 August 2021: within 30 November 2021; 1 September 2021 – 31 December 2021: within 28 February 2022. In consideration of the first approaching deadline and the many issues that have surfaced from the ADM implementation notice, the Italian gambling regulator has received requests from betting operators for rulings under internal-review procedures to revisit the application and calculation roll-out. Considering all of the above, it is frankly not even clear if the new tax collection will ever be paid out should this measure be successfully challenged before the competent Courts. Valérie Peano is an expert in Italy and the EU’s gambling laws and regulations. Since 2009, she has been a member of the Executive Committee of the European Association for the Studies of Gambling and served as its vice president between 2014 and 2018. From 2015 to 2018, she was among the Experts group of the Italian Chamber of Deputies IV Permanent Commission (Finance) for gambling matters. She contributes to gambling and legal reviews at both the national and international levels and is a regular speaker at key European gambling conferences.