Nicola Willis plans to tax online gaming, but unless well implemented, it could drive punters to the dodgy gambling websites already targeting New Zealand.
Analysis: National’s plan to tax offshore gambling websites would be a significant step towards regulation of a growing problem in New Zealand – but it is far easier said than done.
The idea was pitched as one of the tools to bankroll Nicola Willis’s tax relief plan yesterday. Willis says closing the “tax loophole” would generate an average of $179 million in revenue each year.
Gambling websites don’t pay income tax in New Zealand and unlike the rest of the developed world, New Zealand simply doesn’t have enforceable online gambling regulation.
According to Labour’s Revenue and Internal Affairs spokesperson Barbara Edmonds, New Zealand has been able to collect GST from offshore casinos since National introduced the "Netflix Tax" in 2016 and has been doing so at a rate of about $37.8 million a year.
So though some GST is captured, more lucrative corporate tax and casino duties are not.
READ MORE: * Unregulated online gambling ‘extremely risky’, minister says * National’s tax plan explained * Online casinos ‘aggressively targeting’ New Zealand
This lack of regulation and taxation means online gambling websites, often based in gambling and tax-friendly jurisdictions such as Malta or Guernsey, have aggressively targeted New Zealand.
Even conservative estimates placed total online gambling revenue as having increased from $139.3m to $332.6m between 2014 and 2020. The real spend was likely much higher and the figures also don’t capture the pandemic era where online casinos saw a user hike.
The market was worth an estimated $350m in 2022 and is expected to top $600m in 2025 the way things are going.
The Department of Internal Affairs has been undertaking a review of the laws governing online gambling since 2019 and seems to have drawn blanks so far.
Previous Internal Affairs Minister Jan Tinetti said the lack of progress was due to the difficult task of creating legislation that works today while future-proofing and satisfying existing interests.
More fuel was added to the fire with the Entain-TAB merger earlier this year, with offshore operator Entain keen to see all gambling websites other than TAB blocked in New Zealand.
This would probably be achieved by requiring internet providers to block websites. Still, New Zealand punters could easily work around geo-blocks by the use of VPNs, or gambling websites could continually change their IP addresses or URLs.
The argument from impacted parties in other jurisdictions is that taxes could push users to online casinos less concerned with obeying foreign laws, and with disregard for harm minimisation measures.
According to casino-led lobby group Responsible Wagering Australia, high tax rates for registered gambling websites “seriously hinders” the ability of licensed Australian online wagering providers to compete against unlicensed and illegal overseas gambling websites.
Obviously talking points coming out of groups like Responsible Wagering Australia need to be taken with a healthy dose of scepticism, but it is part of the balancing act to which Tinetti refers.
Instead of taxation, effort should go towards reinvesting proceeds in harm minimisation.
* This piece was updated to include Barbara Edmonds' comments on GST capture.
