Swedish tax increase weighs on major operators results

News Team November 12, 2024

SiGMA news

Swedish tax increase weighs on major operators results

Sweden’s recent gambling tax hike has stirred considerable challenges among leading gaming operators. In Q3 2024, Swedish state-owned Svenska Spel and horse racing monopoly ATG reported weaker financial outcomes, attributing these declines primarily to the rise in the gambling tax rate, which went from 18 percent to 22 percent in July. The change, designed to increase the nation’s tax revenues, has led to mixed reactions, with both companies acknowledging the toll on their bottom lines while calling for policy reconsideration.

Industry concerns

The recent increase in Sweden’s gambling tax rate has stirred debate, particularly among operators like ATG, which claim the hike will disproportionately impact the horse racing sector. ATG CEO Hasse Lord Skarpl?th has described the tax increase as a “horse tax,” asserting it imposes an undue financial burden on ATG’s contributions to Svensk Travsport and Svensk Galopp, the governing bodies of Swedish horse racing. Skarpl?th explained, “The tax increase affects our surplus to our owners… and thus the entire Swedish horse industry. It can hardly have been the intended consequence of the tax increase.”

To address these challenges, ATG proposed an alternative approach: maintaining the 18 percent tax rate for betting and horse racing … while raising the rate for online casinos to 26 percent! Skarpl?th contended that this approach would not only generate greater tax revenue than the current rate increase but also help preserve essential funding for the horse racing industry. He further noted that targeting online casinos with a higher tax would align with public health goals, given the heightened risks of gambling issues in that segment. ATG plans to continue advocating for a revised tax policy.

Government rationale

The Swedish government defends the tax increase as a necessary step to bolster tax revenue, estimating an annual boost of SEK 540 million (€47 million). The government is also committed to curbing the black market, aiming for a channelisation rate of at least 90 percent to ensure that most gambling in Sweden occurs through licensed operators, strengthening market integrity and public protection.

Research conducted before the 2019 market regulation indicated that a gross gaming revenue tax rate above 20 percent would best support Sweden’s gambling sector. However, the government initially opted for an 18 percent rate to prioritise market stability and channelisation efforts. Now, five years later, Sweden has implemented the originally recommended rate, viewing it as a timely adjustment.

Online-casinos.com commented, “As an affiliate dedicated to featuring only licensed casinos, we support regulatory measures that ensure fair play and player protection. The Swedish Parliament’s recent move to adjust gambling tax reflects a commitment to maintain a safe, transparent market, which benefits not only operators, but most importantly, the players. This tax reform could further bolster trust in licensed operators, as found on the Swedish section featured on online-casinos.com, while also promoting a sustainable environment that supports responsible gambling practices.”

Svenska Spel’s revenue drops and rising costs

Svenska Spel reported a net revenue of SEK 1.78 billion (€156 million) for Q3, a 9.2 percent decrease compared to the same period last year. This decline came despite a growing customer base and a positive performance in certain segments. CEO Anna Johnson explained, “Under the third quarter, Svenska Spel’s customer base continues to grow, and the share of healthy revenues is developing positively.” However, she also acknowledged the disappointing results, adding, “The group’s results are weighed down by lower revenues in other business areas and the increased gaming tax. Lower costs within the group contribute to an operating margin in line with the previous year.”

ATG faces tax and competition pressures

Similarly, ATG confronted a challenging quarter, attributing its weaker Q3 performance to the new tax burden and heightened competition, particularly in the horse racing arena. “The tax increase, as well as lower net gaming revenues in the third quarter, affected three of our most important key figures for the first nine months of the year,” stated ATG CEO Hasse Lord Skarpl?th. ATG’s net gaming revenue for the first three quarters rose modestly by 2 percent year-on-year to SEK 4 billion (€350 million), marking the highest in the company’s history. However, the third quarter has proven tougher, with the increased gaming tax alone raising ATG’s costs by SEK 55 million (€5 million).

ATG CFO Lotta Nilsson Viitala elaborated on the situation: “We are on the plus side over the entire period, but the third quarter has been tougher, especially for horse racing.” She also cited other contributing factors, including major sporting events like the men’s European Football Championship and the Summer Olympics, which drew attention away from local horse racing.