French government responds to EC tax doubts
Government does not believe the existing tax regime offers an economic advantage to the country's race courses.
The French government has responded to the “serious doubts” of the European Commission (EC) last month that its tax regime for online horse race betting is compatible with EU law.
In its journal on 14 January the EU stated that it believed the protection provided to just one sector through distorting competitive conditions in favour of former horse race monopoly PMU was too narrow in economic scope to be justified under EU State Aid rules. These set out what discretionary assistance from a public body, or publicly-funded body, with potential to distort competition, can be granted to domestic industries by Member States.
However, in a letter dated 18 January, the French government responded by saying that it did not believe the tax regime conferred any economic advantage to the country’s race courses, and the fact this was assigned to a particular sector was not an issue under EC rules. “Member States have wide discretion as to the nature of services that could be described as ‘ general economic interest ‘”, it was reported as saying by Les Echos.
The EC opened a formal investigation in November last year into whether the online tax regime combined with the monopoly and lower tax on land-based products enjoyed by PMU amounted to an illegal form of State Aid for the country’s racing industry. PMU currently provides 80% of industry funding for the racing industry, with 74,000 employees and 250 race tracks.
Associate solicitor Marcus Charif of law firm Harris Hagan told eGaming Review that the EC was considering the State Aid case from an opposite direction to that in Denmark, where the EC is currently investigating whether a proposed lower tax rate for online than for offline industries amounts to State Aid.
“This is about the former state monopolies, both PMU and FDJ, having an unfair advantage in the online space, through reduced tax rates and a continued monopoly on land-based products. This combined with a proposed additional sports right tax is seen by the EC as amounting to a State Aid issue.”
State aid granted without EC approval is viewed as unlawful and may be subject to repayment by the aid recipient. The procedure, launched on 17 November last year, could take up to 18 months to run its course.
The proposed additional sports right levy payable by online operators for offering online horse race bets has been suspended pending the EC investigation.