August 10, 2024

Kiwi govt implements gambling duty for offshore operators

It’s been in the works for a while, but it’s now official – NZ online casinos will be required to pay a 12% gambling duty tax. New Zealand’s Finance Minister Nicola Willis delivered on the promise she made earlier this year to implement the Tax Plan that formed part of the National Party’s election campaign to tax offshore online gambling. The plan was endorsed by the Coalition Agreements.

The new tax was made possible thanks to an amendment to the current law that was presented in parliament earlier in March. The Amendment Paper to the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill is being touted by New Zealand’s government as a fulfilment of its earlier tax commitments. The Amendment Paper included all the provisions related to NZ online casinos that have now become a part of the current Gaming Duties Act 1971.

The 12% duty will be charged on all such offshore gambling profits made after 1 July 2024, although any prize money paid out to Kiwi residents will be deducted from the taxable amount. The taxable revenue will not include sports and racing betting made by NZ, as there’s already a 10% ‘consumption charge’ imposed on this revenue.

Which offshore operators will the tax affect?

Referred to as GST (Goods and Services Tax), the levy will be applicable to any GST-registered companies located outside New Zealand which supply remote gambling services to residents in New Zealand.

The tax has been designed to be incorporated seamlessly within current GST rules regarding the supply of remote services. All NZ online casinos are in fact obliged to register and file GST returns in New Zealand as long as the gambling services they offer to Kiwis exceeds the $60,000 across a 12-month period.

Besides the 12%, operators also need to factor in the 13% GST tax that they were already paying under existing legislation. This brings the total NZ gambling tax to 25%, which may appear steep at first glance but in reality, remains competitive when one takes a look at the amounts that remote operators are being taxed in other jurisdictions.

In the UK, for instance, remote gambling companies pay a flat rate of 21% on all gambling revenue every quarter. In Italy, all online casino revenue is taxed at 25%, while Denmark recently increased its rate to 28%.

In Sweden, the online gambling tax is set at a low 18%, but operators also have to pay an annual supervisory fee to the Swedish Gambling Authority (SGA) in addition to their license fees. The amount depends on the operator’s annual gross revenue.

Both Greece and the Czech Republic, on the other hand, levy one of the highest taxes on remote casino operators – 35%. Meanwhile, the Netherlands is eyeing an increase in remote gambling tax from 30.5% to 37.8%

The new tax also brings about added obligations on operators to determine whether players are physically located in New Zealand. This is done using any two tools as provided by the GST remote services rules, including billing address, IP address, mobile country code or banking details.

Moreover, NZ online casinos are bound to file their tax report with the NZ Inland Revenue for each quarter by the 28th of the month after the end of the quarter, with payment being required on the same date. This means the first filing and payment date for 2024 will be October 28 to cover the July – September quarter.

The New Zealand government estimates that it will collect more than $716 million annually from the newly introduced tax, with the National Party arguing that the windfall will make it possible to reduce the amount that New Zealanders are taxed, thus giving back to the people. However, the Inland Revenue’s projections contradict those of the party, with figures hovering at the significantly lower $145 million mark.

What does the average Kiwi spend gambling online

Kiwis so far have shown themselves in favour of having access to the top NZ online casinos and, given the upward trend the igaming market is experiencing, it’s unlikely that they will want anything to change.

If the trend continues, the popularity of online gambling is set to increase in the coming years. According to Statista, revenue from online gambling in New Zealand is projected to reach $2 billion in 2024, with an annual growth of 5.58% thereafter. Moreover, the average Kiwi player spends $2,200 gambling online, according to The Nation Online.

Given these facts, it is very unlikely that the new taxation requirements will be a deterrent to NZ online casinos. Coupled with the fact that most other jurisdictions are already levying a similar rate of tax or are in the process of implementing it, there would appear to be little advantage for remote gambling sites to give up on the NZ market.

Will taxation lead to an NZ gambling regulator?

The biggest question currently being asked by industry experts is whether we should expect New Zealand to follow in the footsteps of other countries by instituting its own online gambling regulator.

While there is already a New Zealand Gambling Authority in place, so far this has only assumed responsibility for the licensing and operation of land-based casinos, with remote gaming companies remaining unregulated within the region. Online gambling is currently regulated by the Department of Internal Affairs, however, this does not issue licenses and limits itself to enforcing regulations related to remote gaming.

The majority of jurisdictions that tax online gambling revenue have chosen to go down the licensing route, with the UK operating through the UK Gambling Commission, the Netherlands instituting the Kansspelautoriteit and Malta the Malta Gambling Authority.

The New Zealand government has given no indication that this is a possibility as yet. But should it turn out to be the case, the top online casinos in NZ will undoubtedly rise to the occasion.

By Ramona Depares