Washington, DC – November 14, 2013 – Following the introduction of legislation earlier this year by Rep. Pete King (R-NY) to allow Internet gambling activity and protect consumers in a strictly regulated environment, Rep. Jim McDermott (D-WA) introduced today companion legislation that would ensure taxes and fees are collected within a regulated regime. 

 

The Safe and Secure Internet Gambling Initiative, a leading advocate for Internet gambling regulation, commends Rep. McDermott’s introduction of the Internet Gambling Regulation and Tax Enforcement Act of 2013, which offers a sensible approach to collect much-needed new revenue for federal and state budgets.

 

“With all of the fighting in DC over funding issues, you’d hope this opportunity to generate billions in economic activity and new government revenues will get serious consideration, not to mention the many new jobs that would be created.  With the pending Internet gambling bills, Congress can put in place broad consumer protections and capture significant new government revenues without having to raise taxes,” said Michael Waxman, spokesperson for the Safe and Secure Internet Gambling Initiative. “It’s shocking that Congress has decided to leave in place hypocritical laws that allow some forms of online gambling activity, such as betting on horse racing, but prohibits others, like poker and bingo. You’d be hard pressed to find another industry pleading for a chance to offer online the same activities permissible offline, and be taxed fairly to do so.”

 

The Internet Gambling Regulation and Tax Enforcement Act of 2013 would create a twelve percent deposit tax paid by licensed operators, not players. The federal government would collect four percent of the tax, while qualified states and tribes that participate in the federal regime would receive eight percent. The online gambling tax payable to states and tribes is dependent upon the location of the customer in the respective qualified state or tribal area at the time the customer makes a deposit. This is consistent with the point of consumption tax methodology being implemented in the UK.    

 

Rather than using the complicated Gross Gaming Revenues (GGR) methodology as a basis for tax calculations in a multi-jurisdiction environment, a deposit tax is optimal for the Internet gambling market. A deposit tax is paid up-front, creates transparency and readily supports revenue calculation and distribution across multiple jurisdictions based on a place of consumption methodology.      

 

The expansion of Internet gambling is projected by 2020 to generate upwards of $9.3 billion in revenue, the same amount of revenue as generated by Las Vegas and Atlantic City markets combined today, according to Morgan Stanley.

 

Since the Department of Justice’s opinion in late 2011 that Internet gambling activity is not prohibited under federal law unless it involves sports, three states have moved to offer intrastate Internet gambling with other states eager to follow suit. Already there is discussion of interstate compacts which would effectively mirror a fragmented federal regime, if ever agreement could be reached on the finer detail, but with duplicate costs in participating states. To date each state has approved varying offerings, suitability criteria, consumer protections and tax structures. The federal regime proposed by Rep. King would offer a uniform regulatory framework to control the activity and protect consumers. While Rep. McDermott’s bill would offer a uniform, effective tax regime.

 

About Safe and Secure Internet Gambling Initiative

 

The Safe and Secure Internet Gambling Initiative promotes the freedom of individuals to gamble online with the proper safeguards to protect consumers and ensure the integrity of financial transactions. For more information on the Initiative, please visit www.safeandsecureig.org.