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Economics of Gambling in Portugal

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In Portugal, the government gives concessions to private companies for gaming operations. Lotteries are operated by Santa Casa da Misericordia de Lisboa. Casinos are operated by various private companies and bingos outside casinos are run by private companies or notfor- profit organisations. (Source: GBGC Report)

Casino and bingo contribute heavily to good causes in Portugal. All the national lottery proceedings go to a variety of charitable, cultural, sportive or public funded organizations. Proceeds generated by the SCML’s Gaming Department go entirely towards social work carried out either by the Santa Casa da Misericórdia de Lisboa itself or by other state funded non-profit-making bodies and are used to provide support to health, social, cultural and sports projects. Casino and Bingo social contributions include Institute for Studies in Tourism (Instituto de Formação Turística – INFTUR), state tourist enterprises and the Municipal Chamber of Figueira da Foz.

The basic rule is that Portuguese law prohibits private persons and other entities to freely engage in the exploitation of gambling. When allowed, gaming and betting are strictly controlled and regulated by public law. In a recent report prepared for the Portuguese Government, a working group enumerated the reasons justifying the well encircled environment in the framework of which gaming may be exploited. Gaming, states de Report, is an “atypical and sensitive economic activity” belonging to public order, which must be closely scrutinised in order to prevent organised crime and money laundering. For the sake of consumers and the protection of families, and in order to “sublimate the human tendency to gambling”, the State undertook to regulate each area of gaming, keeping the few people and entities who are allowed to exploit gaming under tight control.

In practice, the main areas in which Portuguese law allows gaming are casino games carried out in specific zones (the Azores, Algarve, Espinho, Estoril, Figueira da Foz, Funchal, Porto Santo, Póvoa do Varzim, Tróia and in Vidago.Pedras Salgadas). Concessions are awarded on the basis of administrative contracts and the beneficiaries are chosen by public tender. Other allowed games may be the casino games on Portuguese boats or airplanes navigating outside that State’s territorial waters (authorisations may be granted by the Portuguese Government to companies that are owners or freighters of Portuguese ships or aircrafts, or to concessionaire companies of gaming areas with permission of the former), and horse racing bets. Concerning internet gambling, only lottery games can be explored, and under the auspices of Santa Casa da Misericórdia de Lisboa.

GAMING SECTOR ANALYSIS

Lotteries

Santa Casa da Misericordia de Lisboa (SCML) has established a relationship with the authorities and the general public based primarily on social goals and its assistance to the disadvantaged. The State awarded the monopolistic operation of lotteries and betting to the SCML “to ensure their association with good causes, in recognition of the trustworthiness and credibility that [this institution] has demonstrated throughout its long history.” The National Lottery has been a part of Portugal’s collective culture since 1793 and is explored by its Games Department (GD-SCML).

Santa Casa da Misericordia de Lisboa enjoys substantial GGR growth of the games it offers. In 2000, the total company’s GGR was €870.68 million. The latest GGR growth is presented in the table below. Totobola, Totogolo, Totoloto, Loto2 and EuroMillions are all pari-mutuel betting games. Joker is an add-on to these games.

SCML is intending to introduce new game – Millions League in the next five years.

From the first draw of EuroMillions, on October 8 2004, up to the draw of October 7 2005 (first year of existence), EuroMillions achieved €859.98 million in sales ( 2004: €149,512,706; 2005: €710,468,278). The weekly sales average is €15,9 million. Portuguese bettors have been awarded with over 17,3 million prizes so far, which corresponds to €359.88 million. This means that 26% of the total amount of EuroMillions prizes have been ascribed to Portugal (5 first prize winners). Portuguese players show a weekly per capita betting average of €1.59.

According to art.13 of the Portuguese State Games Retailers Regulation, retailers are representatives of players in relation to the Games Department of Santa Casa (GD-SCML) and never the opposite, meaning that, under no circumstances do they represent the GD next to the players. In what concerns employment, retailers freely manage their businesses, with no GD interference. Yet, some considerations can be made on the subject. Retailers, which exclusively commercialise SCML’s games (around 160 establishments), employ 1000 to 1.500 people, which, to extend, are indirect employees of SCML. Assuming the remaining retailers (around 4300) employ one additional worker to deal with lotteries, then DG-SCML additionally indirectly employs 4300 people. In total, there are/should be 5300 to 5800 people employed indirectly by DG-SCML.

Casino Gaming

Casinos in Portugal are regulated by the Inspecção-General de Jogos, which is part of the Ministério da Economia. Only the State can license casinos. Casinos are the only premises in which pay-out slot machines may be operated. Some casinos offer bingo, and they all include table games.

There are ten designated areas where casinos may be established. All areas except one have been granted a casino license, but four of these areas do not yet have any operating casinos. Of the remaining six, there are eight casinos in operation, all owned and managed by private sector companies. There are an additional three properties in development.

Thus, four companies share the market in the following proportions: Estoril-Sol – 57.97%, Solverde – 29.71%, Amorim – 8,01% and Pestana – 4,31%.

The revenue of all table games constituted 15% to the total casinos revenue in 2004, compared to 84% from machines and 1% from bingo.

Presently Bingo operates only in the Espinho casino, details of which are presented in the Bingo section of this report.

Tax is paid based on the float that each table or slot machine is required to have at the beginning of a session. In addition, casinos are legally obligated to spend a minimum of 3% of their GGR on cultural events, sports competitions and the promotion of their region internationally. However, casinos often pay up to 10% of GGR for those purposes. Casino operators pay VAT when purchasing goods (gaming equipment included), but they cannot claim it back.

For casinos in Estoril, Espinho and Póvoa de Varzim the annual fee is 50% of the gross gaming revenue. For the Algarve the annual fee is 35% of GGR. For Figueira the annual fee is equal to 30% of GGR. At Madeira, the gaming tax and other impositions equal to 30% of GGR.

The Portuguese Casino sector employs about 3,000 people. This number has been stable. Some changes are expected in future years, due to the foreseeable opening of new casinos.

Machine Gambling Outside Casinos

In Portugal, the operation of gambling machines is only legal inside casinos. Outside of casinos, only amusement machines can be operated, which cannot pay prizes in money or objects of economic value which exceed three times the amount spent by the user. Furthermore, the outcome of the game should at least at partly depend on the user’s skill. In 2002 the Portuguese Government approved a new gaming machine law, which transferred the regulation of AWPs from Regional Governments to Local Councils. Since the introduction of the new law, each one of Local Councils is entitled to fix its own taxation fee for licensing the AWP machines within its jurisdiction. Typically the tax varies between €85 and €250 per annum per machine and an additional stamp duty of 20% over the value of the fixed charge. Gaming machines operators also pay a VAT at 19%. (Source:; GBGC Report)

Even before the introduction of the new regulations, the Portuguese AWP industry has been struggling. In fact the number of AWPs has decreased from about 35,000 to approximately 10,000 machines since the beginning of the decade. In 2004 there were about 7,500 to 10,000 amusement machines, including sport machines and non licensed amusement machines. The number of amusement arcades had declined to about 200 in 2004 compared to 600 in 2002. The negative growth in the sector is expected to continue in the near future.

The Portuguese Trade Association, APED, has been negotiating new regulations with the Government. However, as of 2005 there had been no change in the Government’s position.

Betting

There are four racecourses in Portugal organised by the Servicio Nacional Coudelico. A limited amount of betting is organised by the Portuguese lottery company. As in Spain, Portugal’s hot climate means that horseracing has to take place late at night and so other forms of gambling are more popular.

Bingo

Portugal’s bingo industry is 20 years old and currently consists of approximately 30 Bingo halls outside casinos. Casinos are also permitted to provide Bingo. Presently Bingo in casinos operates only in the Espinho casino.

Of the total 2004 turnover, 33% were retained by concessionaires, 26% went to the State and 41% were paid out in prizes.

Media Gambling Services

No information was found or contributed by stakeholders approached as part of this research endeavor that allowed meaningful discussion of this sector.

Sales Promotional Gambling

No information was found or contributed by stakeholders approached as part of this research endeavor that allowed meaningful discussion of this sector.

Charity Gambling

No information was found or contributed by stakeholders approached as part of this research endeavor that allowed meaningful discussion of this sector.

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