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New federal tax of gambling in the US

A new federal online gambling tax regime has been proposed in the US in response to the launch and pending launch of internet gambling in various states throughout the country.

Put forward by Rep. Jim McDermott, the Internet Gambling Regulation and Tax Enforcement Act of 2013 would create a 12% deposit tax that would be paid by licensed operators rather than players.

The federal government would collect 4% of this tax, with the remaining 8% being distributed to qualified states and tribes in the federal regime.

The tax payable to states and tribes would remain dependent upon the location of the customer in the respective state or tribal area at the time they made their deposit.

The new deposit tax regime would operate in a similar fashion to that of the Point of Consumption tax that is due to be implemented in the UK market.

Supporters of the new regime said that rather than using a Gross Gaming Revenue (GGR) type of methodology as a basis for tax calculation in a multi-jurisdiction environment, a deposit tax approach would be better suited to an online gambling market.

Deposit tax is paid up front, creates transparency in the market and supports both revenue calculation and distribution across multiple jurisdictions based on a place of consumption methodology.

Online gambling is expected to grow significantly in the US following the launch of internet gaming in Delaware and Nevada, in addition to the pending launch in New Jersey.

According to Morgan Stanley, online gambling will generates upwards of $9.3 billion (€6.9 billion) in revenue by 2020, the same amount of revenue currently generated by the Las Vegas and Atlantic City land-based markets.

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