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Playtech Faces Profit Drop Due to Italian Tax Increase
- December 26, 2018 By Oliver Young -
Playtech, the worldwide-recognized game software provider with 20 years of presence in the iGaming industry, has faced a profit drop due to its latest investments in the Italian gambling market. Following the €1 billion Snaitech acquisition, and the Italian gambling tax increase, Playtech has announced a significant profit cut estimate for the year ahead, since 2019 earnings will be €20 to €25 million lower.
In a recent industry update, the prominent software provider has announced to lower its 2019 estimate by around €20 to €25 million, stating that it was due to the Italian tax increase that will take effect from January 1, 2019.
Playtech has dramatically expanded its Italian presence in 2018 with the Snaitech acquisition with the purpose to offer various types of gambling activities in the Italian gambling market. The provider stated that the Italian legislation is expected to get the final approvals for the tax increase, even from the Chamber of Deputies, and will take effect next week. In the official statement, Playtech states that the expected impact on its earnings from this legislation is in addition to the previously announced one from the 2018 Dignity Decree.
The latest Italian government replaced the previous regime’s “Jobs Act” with the 2018 Dignity Decree, which is a legislative act that covers aspects of temporary contracts and other labour relations.
Therefore, Playtech warned investors about the profit cut. The investors, on the other hand, reacted alarmingly and pushed its share price down. On Monday, Playtech shares were nearly 7% down, which is a significant blow considering its market situation. In fact, Playtech’s shares in 2018 opened with around 879p, and as of Monday, are as low as 370p. The stock traded the shares for as low as 357p. The announced €20 to €25 impact on its EBITDA, which is short for Earnings before Interest, Tax, Depreciation and Amortisation estimates, was clearly the reason for the share crash.
Italy’s Tax Increases
The approval for the new gambling tax increase by the Chamber of Deputies is still pending. The Budget Committee will review it and then the full Chamber will sit down on Friday and will put it to a vote.
Nevertheless, the Senate approved it and the new law is expected to come into force next week. Online casino tax will increase from 20% to 25%, virtual betting from 20% to 22%, sports betting from 22% to 24% and land-based sports betting from 18% to 20%. There will be a tax increase on AWP (Amusement with Prizes) machines and video lottery terminals, too.
The tax increases were proposed and then approved by the Senate, as Premier Giuseppe Conte says, in order to restore some equity to tax codes. The government expects the tax hikes to deliver additional €770 million to the annual revenue. To make matters worse for the gambling industry, Luigi Di Maio, the Deputy Premier of Italy bragged that the Italian gambling industry is now the most taxed in entire Europe. He claims that their ultimate goal to take money from those who have taken so much from Italian people.