Britain’s casinos have finally been allowed to reopen. The government gave the green light to nearly all the casinos, except those in areas still in lockdown where the incidence of new cases of COVID-19 is considered high. What has changed since the government drastically rescinded its permission at the eleventh hour at the end of July? Not much, really. If anything, the number of new cases of COVID–19 being detected has increased, so the change of heart is baffling.
I think the government´s last–minute initial reversal, after giving the go–ahead to reopen, is symptomatic of the challenge facing most of the gaming industry in Europe.
The industry has very few friends and even fewer in the echelons of political power. Consequently, we have seen and are continuing to see decisions being made by those in power that are detrimental to the industry, without any evidence that these actions will achieve the expected results. Whether it be the closure of slot arcades in Berlin or Latvia, reductions in the number of gambling machines in Italy and Spain, reduction in maximum stakes or growing restrictions on casinos in the UK, the aim is to protect gamblers. But there is sparse evidence to suggest that these actions will.
In the main, gambling venues in Europe are small and regulated on a national basis. Small means little perceivable economic impact. Contrast this with the U.S., where they are very large and regulated on a state–by–state basis. Each individual venue can have an outsized economic impact on the surrounding area. The jobs created by just one casino can be significant for the local community; in some places, they are the largest employer. Local and state politicians are happy to be seen supporting casinos if it means endorsing a large number of jobs (i.e., votes) and a significant contributor to the state budget.
In some states, there is a tension between Native American reservations and the neighbouring communities. One tribal chief wanted to put up a sign in the local town, which was off the reservation, pointing the way to the casino on the reservation. The town council refused to allow it. So the chief asked that the casino employees be paid one–quarter of their weekly wages in $1 bills. That weekend, local shops noticed how many of these bills started to appear in their tills. The next week, the employees were paid half their wages in dollar bills. Pretty soon, the local council got the message: The casino was a large employer and an important contributor to the local economy. And the Chief got his sign.
In Europe, I know of only one instance where the government has gone out of its way to “bend the rules” in favour of a gambling business. Holland Casino is a quasi–state–owned business. When the EU 3rd Money Laundering was implemented in 2012, all European casinos had to record the identities of customers who gambled more than €2,000. All except Holland Casino, which used the same figure as banks, €10,000. Why? Because their owner was the Dutch Ministry of Finance. So the Dutch government was prepared to accept that because the casino group was owned by the Ministry of Finance, it should be treated in the same way as a bank. It helps to have powerful friends.
Why are European casinos small? High gaming taxes and especially a progressive scale of gambling tax with a high top rate mitigates for more smaller casinos rather than one large casino. Generally, governments in Europe have used taxation to control gambling supply. Obviously, with low gambling taxes, operators can be profitable with lower levels of market share, i.e., lower gross–revenue levels. High gambling taxes lead to a widely distributed and relatively small gambling product. And if the argument proposed is that fewer venues mean less harm, high tax rates would appear to run counter to this.
The following is an example of high taxation being used to control supply. A few years ago, I was invited by a finance minister of one of the Lande (States) in Germany to see if I thought a defunct shopping mall and theme park could be converted into a successful gambling–led destination. The project had been developed with money from the Lande and not an insignificant amount from the EU – the theme park, which was as exciting as a brick wall, had opened, but had traded poorly and closed. The mall, unable to find tenants, had not opened at all. The whole thing was an extreme embarrassment to the state government.
I explained that the development could be repurposed as a gaming destination, but the gaming tax as structured made it impossible for the project to succeed financially. The top marginal rate was 80% of GGR. You cannot invest the money or spend the marketing Euro required to get people to travel large distances if you’re left with only 20% of the revenue generated to play with and make a return.
The finance minister hadn’t held the job for very long. He was young and aggressive and said he would have no problem reducing the tax if it meant he could repurpose the mall and park. We agreed to keep in touch and revisit when he had feedback on changes to the tax structure.
A few weeks later, he called me to say that it was no–go; the justice minister was refusing to go along with the plan. Firstly, the minister saw problems with gambling getting out of control if taxes were reduced. Secondly, the German Lande had an informal agreement among them to keep tax levels more or less the same. Otherwise, they believed, it would become a race to the bottom, with each Lande offering lower and lower tax rates and gambling spreading like wildflowers.
Because gambling venues are small, it is difficult to gain any political support. Politicians are swayed by voters and small gambling venues do not have a substantial enough positive impact on the lives of those who live near them to turn locals into fans. On the contrary, high taxes on gambling necessitate venues with few employees, e.g. arcades, betting shops, etc., where only a handful of people are employed at each venue
Also, it does not help that gambling is regulated in silos. The regulation for casinos is different from arcades, which is different from online gambling, etc. This leads to any request to relax regulation by one sector to be seen by another sector as a proposal for unfair competition, so they fight it. In effect, the industry successfully does the job of those who are opposed to it.
So how does Europe’s gambling industry obtain the support it needs? I don´t believe grand gestures, such as donating £100 million to GambleAware, work. A government minister might like it, but people have short memories. Also, critics argue that if the companies can afford that level of donation, why didn´t they start doing it years ago?
I would take a leaf out of the British Columbia model, where part of the revenue from an evening went to a local charity. This has allowed BC casinos to go from a CAN$2 maximum stake on table games and no slot machines to full–fledged casinos today.
Europe’s gambling industry should start at the bottom, building grassroots support. And the best way is to copy the BC model: Pick one or two local and highly visible charities and work consistently with them, donating money, expertise, and employees’ time. Over time, local residents will start to see the positive effect that gambling businesses can bring. But it promises to be a long haul. Changing attitudes does not happen overnight.
