The European online poker industry changed drastically when the UK enforced its new licensing and taxation regulations late last year. The world’s largest poker site, PokerStars, announced in October that there would be several alterations to the rake and VIP schedule to help offset the burden of taxation. However, the online poker operator has rolled back almost all of those changes for UK player and cancelled those that had not yet gone into effect… at least, for now.
Some of the intended alterations had already been made prior to January 1, 2015, when the full scope of changes were scheduled to take place. UK online poker players with a keen sense of observance may have noticed that, not only were the pending changes not made, most of the previous modifications were returned to their original state.
A post on the TwoPlusTwo forums appeared yesterday explaining why.
PokerStars Rake Increases Canceled
“All rake increases announced in October, except for Spin & Go changes, are cancelled effective immediately,” read the post from the online poker operator’s 2+2 representative, ‘PokerStars Steve’. Having announced a full schedule of rake increases on October 29, 2014, the first to be implemented was on Spin & Go tables, which took place only days later on November 3rd.
According to ‘PokerStars Steve’, “all other rake changes announced in October, including those not yet implemented, are cancelled.” He also noted that the rollback of rake increases had already taken place well before the time of posting.
“We will not implement any additional increased rake in 2015 other than possibly in jurisdictions where we experience gaming duty or VAT,” he continued.
For online poker players in the UK, that’s great news, but in the jurisdictions of France, Italy and Spain, not so much. Those ring fenced markets have already been hit with rake rate increases and VIP reductions to help PokerStars offset 50% of the local tax burden.
PokerStars Changes to VPP Multipliers for Taxed Countries
“Within a few months we will reduce the VPP multipliers for some countries that are subject to gaming duty or VAT but that do not have their own software clients,” explained the representative, which again leaves UK players in the clear (for now). Affected states can expect to see the changes take place “likely within the next two months.”
‘PokerStars Steve’ added that the modifications will reflect a “previously communicated policy of sharing up to 50% of taxation with players,” noting that their Denmark and Belgium markets are already operating under the reduced VP multipliers.
France, Italy and Spain
The post went on to explain that PokerStars uses “varied combinations of higher rake and lower rewards as we aim to pass on half of the tax cost to players.” Many members of the online poker room in ring-fenced jurisdictions have argued that PokerStars is adjusting the rake and VPP schedule far too much to constitute half of the tax burden, but ‘PokerStars Steve’ explicated the misconstrued elements within the algorithm.
Merely as an example, he wrote: “Reducing rewards by 10%… does not cover half of a 20% tax. Tax is generally calculated based on rake/fees generated, not rewards. Consider a case where a player pays $10 in rake and earns $3 in rewards. If we are taxed 20% of revenue, that is $2. If we pass half on to players, that is $1. In order to reduce rewards by $1 out of $3, we would have to reduce rewards by 33%, all to pass on half of a 20% tax.”
Thus, instead of decreasing rewards by such a high amount, rake increases are necessary as well. However, PokerStars Steve went on to say that, “For shared liquidity we have thus far only adjusted for tax increases by lowering rewards,” due to the “technical challenge” in variable rake/fees to players of the same game. “As a result, to date we have passed on substantially less than half of the tax.”