A spotlight was cast yesterday on Malta’s burgeoning online gaming industry, the biggest in the EU by number of firms, as the European Commission launched its much-awaited Green Paper on the sector.

The official position in Brussels is that the paper is intended for consultation purposes and aims merely to “gather information”. However, many in the multi-billion euro industry fear this may be the first step towards the harmonisation of rules across the 27 member states.

This would not be in the interest of Malta, described by EU officials during a briefing yesterday as “Europe’s gambling hub” which had managed to attract hundreds of online gambling companies due to its “favourable taxation regime”.

The island disagrees with the majority of member states, which want specific and harmonised regulation. Both Malta and the UK, the two main players in the EU’s gambling industry, prefer a liberal approach where the common EU internal market rules on cross-border services prevail.

During the briefing, several journalists repeatedly quizzed the Commission on how it was possible that the smallest member had the biggest register of online gambling companies.

The reply from a Commission official was that Malta was not the right example when making comparisons as “it is a specific case and not a normal country” in this sector.

Dismissing suggestions that Malta did not have any rules in this sector or turned a blind eye on certain regulations, the Commission official said: “Malta has managed to attract a big number of online companies due to its favourable tax incentives. However, Malta has a good functioning regulatory system.”

Figures in the Green Paper show Malta’s growing economic interests in the sector. With 500 registered online gaming companies by 2008, its share of revenue from gambling, technically known as Gross Gaming Revenue (GGR), amounted to 7.82 per cent of its GDP for that year. This was 11 times more than the EU average, which stood at just 0.68 per cent of GDP in the same year.

According to the Commission’s officials, despite the fact that some member states, like Germany, prohibit online gambling, it is almost impossible to prevent citizens from accessing online websites and trying their luck. “In this context it is obvious that some of the German money is ending up in other countries.”

The Green Paper states that online gambling is a fast developing business in Europe, with almost 15,000 websites already identified and total annual revenues exceeding €6 billion in 2008. It is expected to double in size by 2013.

National legal frameworks vary enormously across the EU, with different rules applying to licensing, related online services, payments, public interest objectives and the fight against fraud.

The EU executive said that in order to ensure legal certainty and effective protection of EU citizens in this fast-growing cross-border service activity, it was important to evaluate how possibly differing models could co-exist within the Internal Market.

“The primary aim of the Green Paper consultation is therefore to obtain a facts-based picture of the existing situation in the EU online gambling market and of the different national regulatory models,” the paper states.

Internal Market and Services Commissioner Michel Barnier emphasised that the Commission had “no pre-determined views” on the possible follow-up.

“The online gambling market in the EU continues to grow rapidly and generates important revenues that are sometimes channelled into good causes.

Its expansion must go hand in hand with a determination to protect our citizens, especially minors, and to ensure that offers of these types of services within the EU are sound and well-regulated.”

The consultation will be kept open until the end of July.

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