A Taxing Situation for BetandWin in Austria

16 June 2005

The office of Vienna's public prosecutor says that Austria-based BetandWin should have been taxed on revenues generated by its offshore online gambling subsidiary. The office has confirmed with Austria Presse Agentur that it is investigating the company under suspicion of illegal levy on gambling tax.

Ernst Kloiber, a spokesman for Vienna's public prosecutor, said an investigation concerning illegal gambling commenced in May, along with an inquiry toward an "unknown offender."

The investigation comes on the heals of an announcement made in April by the public prosecutor's office in Salzburg and the Treasury stating that Vereins Anonyme Spieler Salzburg (ASS), the Association of anonymous players in Salzburg, lodged a complaint against BetandWin concerning illegal tax collection. BetandWin has dismissed the ASS's claims as baseless.

The company began offering casino and lottery games in December 2001. Because Austria has state gambling monopolies for casinos (Casinos Austria AG) and lotteries (Österreichischen Lotterien GmbH), ASS President Gerald Granig published an advertisement to support his complaints, and according to his legal opinion, the case could have severe consequences.

Granig argues that a stop of proceedings or an acquittal for BetandWin would mean that the present gambling law is no longer in force. Casinos Austria and the Austrian Lotteries, he said, would have paid too much in taxes in comparison with other companies (including BetandWin). Retroactively, he added, a reclaim of at least 100 millions euros (dating back to December 2001) would be in order.

BetandWin counters, however, that it should not be on the hook for back taxes because its online casino and lottery services are operated out of Gibraltar. Its Web site (www.betandwin.com) is organized by a subsidiary, BAW International Ltd., which holds casino and betting licenses issued in Gibraltar under the continuous official supervision of the Gibraltar government.

Martin Arendts, a partner with the law firm Arendts Anwaelte and an expert in gaming law, agrees with the BetandWin argument. Arendts maintains that Austria can not claim any "illicit gains" from BetandWin because its casino games are offered by the subsidiary in Gibraltar. He said the subsidiary's arguments are supported by the Gambelli decision and the freedom to provide services in Europe and that Casinos Austria is not entitled to a reimbursement because the taxation of Casinos Austria AG has no cross-border implications.

BAW International Ltd., a wholly owned subsidiary of BETandWIN.com Interactive Entertainment AG, was granted an annually renewable license (license No. 5) for the negotiation of sports bets at fixed odds in Gibraltar. The company also holds a license for the operation of an online casino (based on the license for the sale of sports bets and granted in November 2001). BetandWin's sports book, casino and lottery services are all run under the BAW licenses.

The company additionally offers Internet poker under a license granted by the Kahnawake Gaming Commission in Kahnawake, Quebec, Canada.

The Austria-based parent company has been listed on the Vienna Stock Exchange since March 2000.

Rob van der Gaast has a background in sports journalism. He worked for over seven years as the head of sports for Dutch National Radio and has developed new concepts for the TV and the gambling industry. Now he operates from Istanbul as an independent gambling research analyst. He specializes in European gambling matters and in privatizations of gambling operators. Rob has contributed to IGN since Jul 09, 2001.