Discrepancies in SOFTSWISS Growth and MGA Tax Revenues

The iGaming industry has experienced remarkable growth over the past few years, with companies like SOFTSWISS, operated by Stable Aggregator Limited, leading the charge.

SOFTSWISS has positioned itself as a dominant force in the industry, reportedly handling billions of euros in bets and generating significant Gross Gaming Revenue (GGR) year after year. With a reputation as a leading software provider for a large portion of online casinos licensed by the Malta Gaming Authority (MGA), one would expect a proportional increase in tax revenues flowing to Malta’s coffers.

However, an analysis of the data from both SOFTSWISS and the MGA reveals a troubling disparity between the explosive growth reported by SOFTSWISS and the moderate, sometimes stagnant, increases in tax revenues reported by the MGA.

The Explosive Growth of SOFTSWISS

SOFTSWISS has been at the forefront of the iGaming revolution, providing cutting-edge technology solutions to online casinos worldwide. From 2020 to 2022, SOFTSWISS reported exponential growth in several key financial metrics, including total bets handled, GGR, and deposits.

For instance, SOFTSWISS reported a staggering 12-fold increase in total bets from €10 billion in 2020 to an estimated €120 billion by the end of 2022. Similarly, the GGR surged by 39.1% from 2021 to 2022, with deposits reportedly increasing by 5.5 times in 2021 alone.

This rapid expansion, while impressive, raises questions when contrasted with the tax revenues reported by the MGA during the same period. Despite the dramatic increases in bets and GGR reported by SOFTSWISS, the MGA’s tax revenues have grown only modestly.

This discrepancy between SOFTSWISS’s reported success and the corresponding tax contributions has led to concerns about potential underreporting of revenue or the use of aggressive tax minimization strategies by operators in the industry.

MGA's Revenue Growth: Moderate at Best

The MGA’s financial reports from 2020 to 2022 tell a different story. While the authority did see some growth in tax revenues, the increases were far from proportional to the growth figures reported by leading industry players like SOFTSWISS.

Specifically, the total tax revenue collected by the MGA grew from €73.5 million in 2020 to €78.7 million in 2022—a modest increase of only 7.1%. The 5% gaming tax, which directly correlates with GGR, showed similarly slow growth, rising from €42 million in 2020 to €45 million in 2022.

Given the magnitude of SOFTSWISS’s reported growth, the expectation would be for a much larger increase in tax revenues if all revenue was accurately reported and taxed. The relatively stagnant tax revenue figures suggest that either the tax framework is not effectively capturing all the revenue generated by the industry, or there may be significant underreporting of revenue by some operators, including those utilizing SOFTSWISS’s platforms.

Exploring the Discrepancies

The sharp contrast between SOFTSWISS’s reported figures and the MGA’s tax revenue growth raises critical questions about the integrity of the reporting and taxation processes within Malta’s iGaming sector.

If SOFTSWISS’s numbers are accurate, then the current tax contributions from the industry are inexplicably low, implying potential gaps in regulatory oversight or possible exploitation of tax loopholes. The discrepancy highlights a pressing need for further investigation to ensure that the full economic benefits of the iGaming boom are realized by the Maltese economy.

In the following sections, we will look deeper into the specific figures reported by SOFTSWISS and compare them with the MGA’s data. We will explore potential reasons for the discrepancies and discuss the implications for Malta’s regulatory and taxation frameworks.

Ultimately, this analysis seeks to shed light on whether the current systems in place are adequate to capture the full scope of economic activity generated by leading industry players like SOFTSWISS.

SOFTSWISS Reported Growth (2020-2022)

The following section provides a comprehensive breakdown of SOFTSWISS's reported financial performance from 2020 to 2022. This period saw the company achieve significant milestones in terms of Gross Gaming Revenue (GGR), total bets handled, and deposits. SOFTSWISS reported substantial growth year-on-year, reflecting its expanding influence in the iGaming sector.

The data presented below includes specific figures for each year, highlighting the company's rapid development and increasing market share. This information forms a critical part of our analysis, particularly when compared against the tax revenues reported by the Malta Gaming Authority (MGA) during the same timeframe.

Gross Gaming Revenue (GGR) and Bets Handled

2020: SOFTSWISS reported handling €10 billion in total bets across all its platforms. This was a significant milestone and represented a 50% year-on-year increase compared to 2019.

2021: By June 2021, SOFTSWISS had reported handling €5 billion in bets in just the first half of the year, and by the end of 2021, this figure grew to €15 billion, representing a 50% increase from the previous year. The GGR for 2021 was reported at €230 million in July, showcasing a 30% increase from the GGR reported in 2020.

2022: SOFTSWISS achieved a monthly bets figure of €10 billion in Q4 2022, suggesting an annualized total of €120 billion for the year. The GGR was estimated to have grown by 40% year-on-year, with estimates placing the annual GGR close to €320 million.

Deposits and Client Growth

2021: Deposits reportedly increased 5.5 times year-on-year compared to 2020, indicating a massive influx of capital into the platforms managed by SOFTSWISS.

2022: Deposits continued to grow, with another 40% increase reported over the year, suggesting total deposits potentially reaching €3 billion for 2022.

MGA Tax Revenue and Industry Contributions (2020-2022)

This section examines the Malta Gaming Authority's (MGA) reported tax revenues and compliance contributions from 2020 to 2022, focusing specifically on the 5% gaming tax, which is directly linked to Gross Gaming Revenue (GGR). Despite the reported growth in the iGaming sector, including substantial increases in bets handled and GGR, the tax revenues collected by the MGA show only moderate growth over this period.

The figures presented below illustrate the total tax contributions year by year, providing a foundation for understanding potential discrepancies between industry growth and tax revenue. This analysis is crucial in evaluating the effectiveness of the current tax framework in capturing the full economic impact of the iGaming industry in Malta.

Tax Revenue and 5% Gaming Tax

2020: The MGA reported total compliance contributions of €73.5 million for the year. The 5% gaming tax revenue collected was approximately €42 million.

2021: The total tax revenue grew moderately to €77.8 million, with the 5% gaming tax contributing about €44 million. This represented a 5.8% increase in total tax revenue compared to 2020.

2022: The MGA’s total tax revenue saw a slight increase to €78.7 million. The 5% tax contributed €45 million. The increase from 2021 to 2022 was just 1.2%, indicating a near-stagnant growth in tax collections despite the industries reported overall growth.

Comparison and Potential Discrepancies

In this section, we explore the potential discrepancies between the significant growth reported by SOFTSWISS and the relatively modest increase in tax revenues collected by the Malta Gaming Authority (MGA). Despite SOFTSWISS's dramatic increases in Gross Gaming Revenue (GGR) and total bets handled, the corresponding rise in MGA tax revenues does not appear to align proportionately.

The analysis below looks into these differences, raising questions about potential underreporting or tax minimization strategies within the industry

GGR Growth vs. Tax Revenue

SOFTSWISS Growth:

• • From 2020 to 2022, SOFTSWISS reported a GGR growth from €230 million in 2021 to approximately €320 million in 2022, marking a 39.1% increase.
  • The bets handled by SOFTSWISS grew from €10 billion in 2020 to an annualized €120 billion by the end of 2022—a 12-fold increase over two years.

MGA Tax Revenue:

• • Despite the substantial reported growth by SOFTSWISS, the MGA’s tax revenue only grew by 7.1% from 2020 (€73.5 million) to 2022 (€78.7 million).
  • The 5% tax revenue, which would be directly impacted by GGR, increased by 7.1% from €42 million in 2020 to €45 million in 2022.

Discrepancies in Proportional Growth

Bets and GGR vs. Tax Revenue:

• • SOFTSWISS’s GGR growth of 39.1% from 2021 to 2022 and its 12-fold increase in total bets should theoretically have led to a more substantial increase in the MGA's tax revenue if all the revenue was being reported and taxed appropriately.
  • However, the MGA’s total tax revenue only increased by 1.2% from 2021 to 2022. This suggests a possible underreporting or a lack of correlation between reported GGR/bets and tax contributions.

Potential Underreporting or Tax Minimization

If SOFTSWISS’s reported figures are accurate, their substantial contribution to the online gaming sector should be reflected in the MGA’s tax collections. The relative stagnation in tax revenue despite the significant reported growth suggests either:

• • Underreporting: Operators might not be fully reporting their earnings.
  • Tax Minimization Strategies: Operators could be using aggressive tax planning strategies to minimize taxable income, resulting in a lower-than-expected tax revenue.

Evaluating the Discrepancies between Reported Growth and Tax Revenue

The analysis reveals a noticeable disparity between the substantial growth reported by SOFTSWISS in terms of Gross Gaming Revenue (GGR), deposits, and total bets handled, and the relatively modest increase in tax revenues reported by the Malta Gaming Authority (MGA). Specifically:

• SOFTSWISS reported a dramatic increase in the volume of bets handled, growing over 1000% from €10 billion in 2020 to €120 billion in 2022, alongside a 39.1% increase in GGR between 2021 and 2022.
• Conversely, the MGA’s tax revenue from the 5% gaming tax rose by only 7.1%, from €42 million in 2020 to €45 million in 2022.

This discrepancy raises questions about the effectiveness of the current tax framework in capturing the full extent of the revenue generated within the industry.

It also suggests the possibility of underreporting or the use of tax strategies that might minimize the taxable income reported to the MGA. To ensure that the tax revenues more accurately reflect the industry's growth, further examination or regulatory adjustments may be necessary.

It is important to note that these observations are based on publicly available data and are not intended to suggest any illegal activity but rather to highlight potential areas where the regulatory system might be improved to ensure fair and comprehensive tax collection.

MGA Reports Utilized for Comparative Analysis (2020-2022)

The following section lists the official reports from the Malta Gaming Authority (MGA) that were used to compare the reported growth of SOFTSWISS with the tax revenues and compliance contributions collected by the MGA.

These documents offer critical insights into the financial performance and regulatory oversight of the iGaming industry in Malta during the period from 2020 to 2022.

MGA Annual Report 2020

• File ID: MGA – Annual-Report-2020
• This report provides the overall financial performance of the MGA, including total tax revenues, compliance contributions, and the breakdown of revenue collected through the 5% gaming tax.

MGA Interim Report 2020

• File ID: MGA – Interim-Report-2020
• Offers mid-year insights into the tax revenues and compliance contributions for the year 2020, helping to establish a baseline for comparison.

MGA Annual Report 2021

• File ID: MGA – Annual-Report-2021
• Contains detailed financial data for 2021, including the total tax revenue and 5% gaming tax revenue. This report helps track the year-on-year growth compared to 2020.

MGA Interim Report 2021

• File ID: MGA Interim-Report-2021
• Provides additional context and financial data for the first half of 2021, offering a clearer picture of the industry's performance and MGA's revenue collection.

MGA Annual Report 2022

• File ID: MGA – Annual-Report-2022
• Details the MGA's total tax revenue, compliance contributions, and the 5% gaming tax for 2022, allowing for a direct comparison with the previous years.

MGA Interim Report 2022

• File ID: MGA – Interim-Report-2022
• Offers interim data for 2022, showing trends in tax revenue collection and industry performance up to mid-2022.

MGA Interim Report 2023

• File ID: MGA – Interim-Report-2023
• Although not fully included in the final analysis due to the focus on 2020-2022, this document provides context for ongoing trends in tax revenue and industry growth.

SOFTSWISS Data Used as the Basis for Analysis (2020-2022)

The following is a comprehensive list of key SOFTSWISS press releases from 2020 to 2022 that were instrumental in understanding the company's reported growth. These press releases provide detailed insights into the significant increases in GGR, total bets handled, and deposits across SOFTSWISS platforms, forming the foundation of our analysis.

1. Title: Game Aggregator Hits €10 Billion in Total Bets in Q4 2022
   • Date: December 2022
   • Key Information: SOFTSWISS achieved a monthly bets figure of €10 billion in Q4 2022, suggesting an annualized total of €120 billion for the year.
2. Title: SOFTSWISS Achieves 40% Growth in GGR Year-on-Year in 2022
   • Date: December 2022
   • Key Information: The GGR for 2022 was reported to have grown by 40% year-on-year, highlighting substantial revenue growth.
3. Title: Total Deposits Soar 5.5 Times YoY: SOFTSWISS Managed Services Reveal Reactivation Results for 2022
   • Date: March 3, 2022
   • Key Information: Indicates a significant year-on-year increase in deposits, emphasizing the financial growth on SOFTSWISS platforms.
4. Title: Game Aggregator Passes €230 Million GGR in July 2021
   • Date: August 5, 2021
   • Key Information: SOFTSWISS reported a GGR milestone of €230 million in July 2021, indicating strong mid-year performance.
5. Title: Affilka by SOFTSWISS Expands Client Portfolio to 100 Brands
   • Date: July 22, 2021
   • Key Information: This post discusses the expansion of Affilka, SOFTSWISS's affiliate management platform, which likely contributed to increased player engagement and betting activity.
6. Title: Game Aggregator Hits €5 Billion in Total Bets Milestone
   • Date: June 17, 2021
   • Key Information: SOFTSWISS announced reaching a €5 billion total bets milestone by mid-2021, showcasing rapid growth in betting volumes.
7. Title: Total Bets and GGR in Q1 2021 See Threefold Increase Quarter on Quarter
   • Date: April 28, 2021
   • Key Information: SOFTSWISS reported a threefold increase in total bets and GGR in Q1 2021 compared to the previous quarter, highlighting significant early-year growth.
8. Title: SOFTSWISS Reports Record GGR Growth in 2020
   • Date: December 2020
   • Key Information: SOFTSWISS reported significant growth in GGR for the year 2020, marking a record performance despite global challenges.
9. Title: SOFTSWISS Game Aggregator Reaches €10 Billion in Total Bets in 2020
   • Date: November 2020
   • Key Information: The SOFTSWISS Game Aggregator hit the milestone of €10 billion in total bets across all platforms by the end of 2020, highlighting substantial growth in the company’s operations.
10. Title: SOFTSWISS Managed Services See 50% Increase in Deposits in 2020
    • Date: October 2020
    • Key Information: SOFTSWISS Managed Services reported a 50% year-on-year increase in deposits, reflecting strong financial growth across its platforms.
11. Title: SOFTSWISS Expands Client Portfolio by 30% in 2020
    • Date: September 2020
    • Key Information: The expansion of SOFTSWISS's client base by 30% contributed to the growth in betting volumes and overall GGR.