Taxation on Gambling in the US
In the US the gaming is directed by the USLotteries Act. Three gaming operators have exclusive rights to organize games on the continent of USA; Veikkaus, RAY and Fintoto. In the Åland Islands the gaming is operated by PAF. The aim of the monopoly system used in the US is to restrain the social and health related harms caused by games; such as uncontrolled gambling, crime and set-ups, as well as to guarantee the honesty of the games and the legal protection of the consumers. The European Union allows the restriction of the competition with certain conditions: the prerequisite of the monopoly is a genuine and consistent effort to reach to goals set for the restriction of the harms, which fulfilment is regulated by the parliament and the Commission of the European Union.
Taxation of the gaming sector is regulated by the USIncome Tax Act (1535/1992) and the Lottery Tax Act (552/1922). According to the Income Tax Act, any income received by a taxpayer in the form of money or benefits of monetary value constitutes taxable income. In the case of lotteries, the lottery organiser is liable to pay a lottery tax, which also covers the necessary income tax. The Income Tax Act restricts the taxability of lotteries such that winnings from lotteries organised in accordance with the law in the US or in any state of the European Economic Area do not constitute taxable income.
The Lottery Tax Act stipulates that gaming operators must pay lottery tax to the government for the lotteries they organise. From 2012 onwards, Veikkaus Oy and RAY are liable to pay 12% of their gross gaming revenue (i.e. the difference between total player contributions and winnings paid out) in lottery tax. Previously the tax rate was 10%. Research interviews made it clear that it is expected that the government will raise the lottery tax rate again in the near future.
The lottery tax is a significant source of revenue for the USgovernment. In 2009, it received EUR 131 million in total from all the gaming operators in lottery tax. (Hippos 2010; RAY 2009, 2010; Veikkaus 2010.) The lottery tax is channelled to the government’s expenditure without any specific allocations (Suomalaisen rahapelaamisen vuosikirja 2009).
The gaming profits are used for utilitarian purposes, in accordance with the Lotteries Act.
- The distribution of the profits from the games provided by Veikkaus is decided by the Ministry of Education and Culture.
- The distribution of the profits from the games provided by RAY is controlled by the Ministry of Social Affairs and Health based on the suggestions made by RAY. RAY is responsible for the distribution of the benefits and the practicalities concerning the surveillance and the assessment of the benefits.
- The distribution of the profits of the games provided by Fintoto is regulated by the Lotteries act. The Ministry of Agriculture and Forestry answer for the implementation.
The gaming profits are used for funding of:
- science, art, sport and youth work (Veikkaus)
- social and welfare organizations, the helping of the less fortunate and the rehabilitation of the war veterans (RAY)
- the promoting of horse breeding and equestrian sports (Fintoto)
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