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

Tomi Roukka,Anne H Salonen

doi:10.1007/s10899-019-09899-0

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.

Highlights

In 2016, winning money was the main reason for Finns to gamble (Salonen et al 2018)
A Two-Part Model (TPM) is estimated to analyse whether the Tobit model for the data is correct and whether there exists some form of stigma or fixed cost associated with some of the demographic factors
The estimates below median are less than the average ordinary least squares (OLS) estimate, while in turn being higher above the median

Summary

Introduction

In 2016, winning money was the main reason for Finns to gamble (Salonen et al 2018). According to The Economist magazine, Finland is one of the countries with the highest per capita level of gambling expenditures. it is widely recognized that gambling does not solely create utility and welfare for the gamblers and society, that is, some people gamble more than they can afford, causing gambling-related harm (Salonen et al 2018; Browne et al 2016; Shannon et al 2017). It is widely recognized that gambling does not solely create utility and welfare for the gamblers and society, that is, some people gamble more than they can afford, causing gambling-related harm (Salonen et al 2018; Browne et al 2016; Shannon et al 2017). This has been the main reason for governments to regulate gambling, i.e. restricting supply to prevent excessive gambling and to minimize gambling-related harm. The gambling revenues have a significant role as a part of public finance in Finland (Kotakorpi et al 2016)

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Conclusion