SOURCE: Gaming Intelligence Group

Spanish tax authorities have confirmed that they have opened an investigation into allegations of fiscal fraud against foreign online gaming firms, estimated to be valued at €500 million.

A spokesperson for the tax authority said that the department was working closely with the Anti-corruption division of the public prosecutors office to study the legal issues surrounding online gaming companies.

The investigation was opened following a formal complaint by Spanish lottery operator, ONCE, which submitted evidence demonstrating the fact that foreign online gaming companies targeting Spanish citizens fail to contribute taxes in the form of IVA (value added tax), IRPF (tax on employees), and social contributions, all of which are considered to be in breach of Spanish law.

The complaint by ONCE and the subsequent investigation appear to be in response to the European Union’s referral of Spain to the European Court of Justice last month, on allegations of discriminatory tax policies surrounding lotteries.

Under Spanish law, winnings from lotteries organised abroad are subject to progressive income tax, whereas an exemption to income tax is applied on the income from lotteries organised in Spain by certain institutions.

In referring the case to the ECJ, the European Commission recognised the rights of Member States to regulate gambling, but only to the extent that it does not involve any discrimination based on nationality.

Spanish gaming operators are now using the same justification to argue that since they are liable to pay taxes on gambling activities offered in Spain, the same rule must be applied to forms of gambling offered remotely, including from tax havens such as Gibraltar and Antigua.

According to the authorities, one problem faced by investigators is that no official figures exist for the value of bets taken by online gaming sites each year from Spanish citizens, although they estimate the value in 2006/07 at between €400 million and €600 million.

The Spanish professional football league, La Liga, has also joined the chorus of complaints against foreign online gaming companies, calling on the government to show the political will to tackle the situation.

La Liga currently receives 10 percent of the proceeds of sales of football related lotteries, which contributes €50 million annually to the football clubs.

As a result of the popularity of online gaming, La Liga has seen revenues drop significantly and is calling on the government to act, and on online gaming operators to support the sport by also contributing 10 percent of earnings derived from football bets.