In a move that pleases the online gambling industry, the Greek government made an about-face regarding their tax policy. The government has voted for a 30% gross profits tax (GPT) on online gambling. Previously, the plan in the draft bill called for a 9% turnover tax on the industry.

Industry insiders call it a partial victory, getting them to change from a turnover tax to a GPT, though the 30% rate is higher than they would like. A spokesman for the Remote Gambling Association said that they welcome the change, though “the 30% rate that has been suggested in Greece is higher than other jurisdictions, and we will continue our lobbying efforts to bring those more into line with other countries.”

RGA’s CEO, Clive Hawkswood, had previously said that the turnover tax is “simply not viable for operators in a highly competitive global market.” RGA solicited the help of KPMG, an accounting and auditing firm, to determine the impact of being taxed on turnover rather than gross profit. After looking at KPMG’s report, Hawkswood said that “only a gross profits taxation model will provide value for consumers, a reliable source of revenue for the government and a healthy competitive environment for the industry.”

To understand the issue, you need to know the difference between a turnover tax and a gross profit tax. Gross profit is a company’s revenue after subtracting the costs of running that business. In the case of an online casino, payouts to players would be included in that operational cost. A gross profit tax only taxes the online casino on the amount of money they made after paying out winnings, paying for bandwidth, payroll and other costs.

A turnover tax is similar to a value-added tax (VAT) and that tax is levied on the production stages. The same product is taxed at each stage of the process of going from creation to consumer. Under this model, casinos would lose a lot of money because even though they take in lots of money from the players, they return large portions of that money through payouts, bonuses and promotions. Taxing gambling turnover would tax the online casinos on money that they would later pay out to players, rather than keeping for themselves.

By switching to a GPT model, the Greek government has made a rare wise decision, though their current financial state has kind of forced them to look into this whole common sense thing. Hopefully the industry lobbyists will successfully convince the government to lower the 30% rate as well, or else they still risk being the next France – a country with regulations choking the online gambling industry.

Ah, government regulation. Many online poker players and proponents of online casinos support governments regulating online gambling because that gives them easier access to the games. In some countries, it would also take a currently illegal activity and make it legal. There is a problem that goes along with government regulation, though. Actually, there are many problems, but a major one is money. You see, governments aren’t going to regulate an industry out of the kindness of their hearts. They do it for tax revenue.

France recently opened up their online gambling market to foreign operators so online casinos based overseas could attract French customers. This was seen as a victory for supporters of online gambling in France. However, the legislation also mandated a 2% tax increase on all new online gambling sites. Those are sites that are new or new to the French market. For that reason, all overseas online casinos that entered the French market were slapped with a 2% tax increase.

Liberals and other people who know nothing about business would say, “So what? Those rich casinos can afford to pay more money. I don’t care if their taxes went up, since it doesn’t affect me.” The problem is, whenever you raise taxes on businesses it does affect you. It affects anyone who is a customer or partner of that business and anyone employed by that business. When hit with a higher tax, businesses will usually pass that extra cost on to their customers. That is exactly what online casinos are doing.

Most online poker sites operating in the French market have increased the rake by 2%. Some of those casinos and poker rooms are reporting rakes as high as 7.7%. That means it is costing the online poker players a lot of money and they are not too happy about it.

To protest the higher rakes, many online poker players have organized “sit out” protests. This method has the players signing up at poker tables but then refusing to play. With them occupying the table, no one else can take their spot and the casino loses money. Their goal is to force the online casinos and poker rooms to lower the rake percentage. The casinos, however, say that they have been losing money ever since France enacted the new gambling laws and instituted the tax increase and the only way they can remain profitable is to increase the rake.

And there you have the problem. The government running an industry is always bad for the industry, but it’s even worse for the consumers. The poker players don’t want to pay the high rake, but it’s necessary for the casinos to stay in business thanks to the tax hike by the government. Without that additional tax revenue, though, the government would not allow the casinos to operate in their country. It is a situation where nobody wins.

Barney Frank has some friends in the Senate. Okay, probably not friends. I find it hard to believe anyone could actually like the guy, but Frank now has senatorial support in his fight to overturn the online gambling ban. Senator Robert Menendez, one of the few New Jersey politicians not currently under indictment, has introduced legislation that would repeal the Unlawful Internet Gambling Enforcement Act (UIGEA), a bill almost identical to that proposed by Frank in the House of Representatives earlier this year. So, let’s update our tally of those fighting UIGEA: the U.S. House of Representatives, the U.S. Senate, the World Trade Organization, and iMEGA.

Both bills seek to legalize and regulate online gambling. Ever since the passage of UIGEA in 2006, there has been controversy and confusion regarding which types of online gambling are legal and which are illegal. The new legislation would make it all legal and, of course, tax it like crazy. UIGEA is being attacked both on the belief that it is unconstitutional and on the belief that it would stimulate the economy, adding revenue from online gambling to a hurting economy.

I know what you’re thinking. Since when are Democrats concerned with stimulating the economy? I’m having a hard time wrapping my head around it myself. The best answer I can come up with is that their unwillingness to help the economy is trumped by their desire for new taxes. If there’s one thing the Democrats love to do it’s tax you, and if they have to provide minor stimulus to the economy to do it, then so be it. On the other hand, since when does the government taking more money stimulate the economy? Repealing UIGEA would do nothing to create jobs or put extra money in the pockets of citizens, so it’s unlikely that there would really be much, if any, stimulative value in the proposed bills. Ah, finally it makes sense. It’s just about the greedy government wanting more money. So, politics as usual.