Monday, February 11, 2008

Price Waterhouse Cooper Completes Study for Online Payment Processor

A Price Waterhouse Coopers (PWC) study revealed that the United States has the potential to collect at least $8.7 billion and up to $17.6 billion in the next 10 years if it would tax and regulate online gambling, including poker. And those figures don’t include potential sports wagers.

The study was commissioned by the UC Group, an online payment service provider that currently doesn’t do business with U.S. customers. The UC Group specifically asked Price-Waterhouse to determine how much tax would be generated if two separate bills addressing online gambling in the U.S. were passed: Barney Frank’s H.R. 2046, “Internet Gambling Regulation and Enforcement Act of 2007” (which would regulate and license online gambling in the U.S.) and Jim McDermott’s H.R. 2607, which would impose a two-percent licensing fee onto online gambling companies who want to operate here. Both bills remain in committee.

PWC used U.S. online gambling revenue estimates generated by Global Betting and Gambling Consultants, but it subtracted the amount GBGC estimates would be generated by sports betting. Price-Waterhouse did this because if Frank’s bill was passed, all the major U.S. sport’s leagues would most likely refuse to allow their games to be listed by online sports books located here. Frank’s bill allows for the leagues to choose whether they want to be listed or not.

PWC gave UC Group two estimates and only considered states that allow land-based gambling. If all the states that now allow land-based gambling decided to allow online gambling (under Frank’s bill, states sill get to decide if that want to be included), $17.6 billion in taxes would be generated.

The $8.7 billion figure did not take into account the 10 states that currently have laws on their books that specifically prohibit online gambling even though they allow some forms of gambling (Illinois, Indiana, Louisiana, Michigan, Nevada, New Jersey, New York, Oregon, South Dakota and Washington).

In each of these scenarios, most tax dollars (56 percent) would be generated through individual income tax. The rest would come from wagering tax (22 percent) licensing (18 percent) and corporate income tax (four percent).

Barney Frank’s H.R. 2046 was introduced last April. It was referred to the Subcommittee on Commerce, Trade and Consumer Protection on April 30, where it remains. Since being introduced, it picked up 45 co-sponsors.

McDermott’s H.R. 2607 was introduced in June and has been referred to the House Committee on Ways and Means. It has one co-sponsor.

If all the states would tax and regulate online gambling, $33.9 billion in taxes would be generated in the next 10 years, according to the PWC study. The numbers rise considerably when PWC includes sports wagers: $10.2 billion (not counting the 10 states that prohibit online wagering); $21.4 billion (including those 10 states); and $42.8 billion if all states decided to take part.

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