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Distributional effects of gambling taxes: empirical evidence from Italy

Abstract

Deep changes have taken place in the regulation of Italy’s gambling market during the last decade, making it by far the largest in Europe. Tax revenues from the gambling sector raised by the State have grown sharply, reaching more than € 10 billion, corresponding to more than 2% of total tax revenues. Concurrently with these developments, concerns have arisen over the distributional effects of taxes applied to gambling, given that it is internationally recognized that poorer individuals are more attracted to gambling. At present very little is known in Italy about the economic effects of gambling taxes and about their potential regressivity also in comparison with other sin taxes. The aim of this study is to increase our understanding of the incidence of these taxes, comparing the results with those obtained for a selection of other sin and consumption goods. After thoroughly investigating the gambling taxation scheme applied in Italy, we exploit two-part models to study the relationship between gambling tax paid by households and their socio-economic status, measured, alternatively, in terms of income and expenditure. The analysis shows that gambling taxes are highly regressive and opens important questions on possible reforms of the current system. Despite its focus on the Italian context, the analysis offers new insights also for those European countries that in last years have been involved in a process of progressive deregulation of the gambling sector.

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Correspondence to Lucia Leporatti.

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Gandullia, L., Leporatti, L. Distributional effects of gambling taxes: empirical evidence from Italy. J Econ Inequal 17, 565–590 (2019). https://doi.org/10.1007/s10888-019-09423-9

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Keywords

  • Gambling taxes
  • Regressivity
  • Tax incidence
  • Two-part model

JEL Classification

  • H22
  • C50
  • D12