The Winners and the Losers: Tax Incidence of Gambling in Finland

Abstract

Gambling markets have grown rapidly for the last few decades. As a result, gambling is also a very important and common source of tax income for many governments these days. This raises a question about the overall fairness of the gambling taxation systems. In this paper, we aim to study the tax incidence of gambling in Finland. First, we analyse who are the expected payers of the gambling taxes and second, who are expected to be the receivers of the gambling-tax based contributions. In the first part of the study, we analyse the demographic incidence of gambling taxation by using the Finnish gambling 2015 population survey combined with registry based variables. Our data contains 3776 individuals. In the second part of the study, we use data of county level gambling-taxation based contributions to different organisations to analyse how the gambling expenditures are distributed back to citizens in a form of public spending. This study shows that different socio-demographic factors have diverse association with the decisions whether or how much to gamble. The results also suggest that more disadvantaged, i.e. lower income, less educated and rural area living, individuals are expected to be the "losers" of the Finnish gambling taxation system. In other words, the Finnish gambling system is found to be regressive by nature.

Socio-Demographic Factors, Gambling Behaviour, and the Level of Gambling Expenditure: A Population-Based Study

“…Overall, respondents in the low GE group differed from those in the intermediate and high GE groups. Those in the highest or intermediate GE group were more likely to be male which is in accordance with earlier studies (McCormack et al, 2014;Roukka & Salonen 2020;. This may be related to the nature of the games men favour.…”

Social disadvantage and gambling severity: a population-based study with register-linkage

“…Therefore, gambling revenues are properly referred to as a regressive tax. 7 , 13 Further, we found that almost a third of those experiencing problem or at-risk gambling are receiving at least one form of social security benefit, there is a big chance that social security benefits are used to gambling. As amount of social security benefits is small, money spent on gambling is away from essential expenses of everyday life.…”

“…Gambling expenditure tends to increase with income, 5 but people with lower incomes spend relatively larger proportion of their total budget on gambling. 6 , 7 However, there are also studies that have shown higher absolute gambling expenditure among lower income groups on some forms and in some localities. 8 Similarly, problem gambling has been linked with lower personal and household income, 9 perhaps due to less capacity to absorb gambling losses.…”

“… 20 In Finland, the prevalence of past-year gambling was lower among the unemployed compared with employed persons; however, unemployed persons spent at least as much money betting as employed gamblers. 7 Further, unemployment has been shown to be a risk factor for problem gambling among Finnish people. 18 There is also evidence that the receipt of social security benefits is more common among those who are experiencing gambling problems.…”

On the efficiency of Nordic state-controlled gambling companies

“…The Finnish Lotteries Act (23.11.2001/1047, updated 21.12.2016/1286) states that a gambling monopoly is justifiable to prevent and reduce gambling-related harm, but such legal justification does not appear to be in line with the economic realities of raising profit for society. The proceeds from gambling in Finland do not necessarily benefit the geographical areas from which they are collected ( Roukka & Salonen, 2019 ). Moreover, Finnish EGMs are disproportionally placed in poor neighbourhoods ( Raisamo et al, 2019 ).…”