TAXING INTERNET GAMBLING COULD GENERATE BILLIONS FOR U.S.A.

23 November 2007

Massive potential in legalising online gambling, study finds


A tax revenue analysis conducted by independent accounting firm Price WaterhouseCoopers estimates that the regulation and taxation of Internet gambling could generate between $3.1 billion to $15.2 billion in federal revenues over its first five years, and between $8.7 billion to $42.8 billion over its first ten years.

The results of the study was provided in testimony submitted to the House Committee on the Judiciary recently by Representative Jim McDermott (D-WA) who also detailed policy refinements to his legislative proposal, the Internet Gambling Regulation and Tax Enforcement Act.

"Even under the most conservative estimates, licensing and regulating Internet gambling - and collecting the taxes that are due - will provide much-needed revenue to the U.S. Treasury," said McDermott.

"This is money we are currently losing to other jurisdictions, for no other reason than some of my colleagues' think we can actually stop people from gambling online. It is money we will continue to lose if we ignore the fact that if grown adults in America want to gamble online, they can and they will."

The Internet Gambling Regulation and Tax Enforcement Act has been refined to provide better protections against tax cheating and thereby increase federal revenue from permissible Internet gambling activity. The only new fee proposed is a payment equal to two percent of player deposits placed with a licensed gambling operator - fees paid by the operator, not the individual gambler. The two percent deposit fee is designed to equalize the costs of operation in providing gambling services online as opposed to brick and mortar casinos providing gambling services in-person, and would only be applied to online operators.

"To be clear, most of the revenues generated would come from taxes required under existing law that we currently lose because of a misguided belief that we can actually stop Internet gambling," said McDermott. "Specifically, these are not new taxes, but rather taxes on existing activity that is currently unregulated, unsupervised, and underground."

McDermott's legislation functions as a companion bill to the Internet Gambling Regulation and Enforcement Act, legislation introduced by Representative Barney Frank (D-MA) which would establish a licensing and enforcement framework for regulated Internet gambling in the U.S.

Based on a provision in Frank's legislation that permits individual states and sports leagues to prohibit any Internet gambling, the lower figure of projected revenue from regulating Internet gambling reflects a situation in which sports leagues and most states opted-out of the system. An additional estimate of $6.3 billion over five years and $17.6 billion in revenue over ten years is based on an assumption that the sports leagues opt-out entirely and the states that permit gambling activities in brick and mortar casinos world permit the same activities online.

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