Rise in gambling tax fuels illegal betting in Netherlands

In January 2025, the Dutch authorities implemented an increase in the gambling tax rate, raising it from 30.5% to 34.2%. The primary objective behind this decision was to enhance state revenue generated from the regulated gambling sector. However, six months into the new regime, a growing body of evidence suggests that the policy may have done more harm than good. According to recent data, the tax hike has coincided with a notable decline in gross gaming revenue (GGR) from both land-based and online operators, along with a marked increase in consumer migration toward unlicensed, illegal gambling services.

This shift not only undermines the core purpose of the tax adjustment — to increase public funds — but also compromises the Netherlands' ability to provide effective player protection through licensed, regulated platforms.

Drop in gambling tax revenues and overall gross gaming revenue

The Netherlands Gambling Authority (Kansspelautoriteit or KSA) has issued a detailed assessment showing a €30 million shortfall in gambling tax revenue for the first half of 2025 compared to the same period in 2024. This outcome occurred even though the tax rate was officially raised. The analysis reveals that while the state sought to capitalize on the growing online gambling market, the fiscal gain did not materialize as planned.

The decline in tax revenue can be directly attributed to a broader contraction in legal gambling activity. The higher tax burden, coupled with strict regulatory obligations, has deterred consumers from engaging with licensed platforms. Consequently, the GGR across the legal sector has fallen, with the land-based segment witnessing a more severe downturn.

Impact on legal gambling providers

Björn Fuchs, Chairman of VNLOK (the trade association for licensed online gambling operators in the Netherlands), underscored the damaging effects of the tax increase on the competitive viability of regulated operators. In his remarks, he pointed out that legal platforms are now under dual pressure: increased taxation and restrictive regulatory oversight.

Fuchs explained that this creates a challenging environment for legal operators, limiting their ability to offer competitive incentives such as bonuses, higher payouts, and promotional offers. These features are frequently available — and more generous — on illegal gambling sites, which do not bear the same compliance and tax obligations.

The result is a steady shift in consumer behaviour. An estimated 50% of all online gambling activity is now thought to occur through unlicensed channels. This poses serious implications not only for tax revenue but for consumer safety, as unregulated platforms are not subject to Dutch standards of fairness, transparency, or responsible gambling enforcement.

Decline in land-based gambling operations

While online gambling platforms are showing some adaptability in response to the new economic pressures, the land-based sector is suffering significantly. KSA data indicates a 9% drop in the number of active gaming locations in the first quarter of 2025 alone. This sharp quarterly decline is especially alarming when compared to the historical average annual decrease of 6% observed between 2020 and 2025.

Industry stakeholders cite mounting fixed costs, declining footfall, and the difficulty of absorbing the higher tax rate as key reasons behind the rapid contraction. Land-based operators lack the digital scalability of their online counterparts and are therefore less capable of adjusting their business models to accommodate the new fiscal demands.

KSA’s warning on long-term sustainability

Michel Groothuizen, who serves as Chairman of the KSA, has expressed serious concerns about the potential long-term impact of the existing tax structure and regulatory framework. He highlighted a core contradiction in Dutch gambling policy: while increased regulation is intended to promote safer gambling environments, it has inadvertently weakened the financial sustainability of legal providers.

Groothuizen stated:
“The measures we have taken to offer players more protection have made it financially more difficult for providers. This has led to a decrease in the BSR (Belgian Gambling Tax) for the entire market. Consequently, gambling tax revenues have also decreased. The KSA had already indicated this would be the effect before the increase in gambling tax was implemented. A financially driven measure like gambling tax is at odds with the policy objective of offering players more protection. If we want to offer players a protected gaming environment in the future, this requires serious, responsible providers. A financially sound, legal market is essential for this.”

This commentary reflects the delicate balance that regulators must strike between ensuring consumer protection and maintaining the commercial viability of the regulated gambling sector.

VNLOK’s proposal to address the crisis

In response to the deteriorating situation, VNLOK has recommended that the government freeze the gambling tax rate at the current 34.2% level. While this still represents a substantial increase compared to the pre-2025 rate, the freeze would allow for a period of analysis and adjustment.

VNLOK is calling for a formal review of the tax increase’s impact, with particular attention to the unintended rise in illegal gambling. The association further recommends that enforcement efforts be enhanced to combat the proliferation of unlicensed operators.

Crucially, VNLOK stresses the importance of crafting regulatory policies that support — rather than penalize — operators who comply with Dutch law. This includes measures to ensure that licensed providers are not unduly disadvantaged compared to their illegal competitors.

Comparative trends in other jurisdictions

The Netherlands is not alone in facing the complex consequences of gambling tax policy. In several other European countries, aggressive tax increases have led to similar outcomes, including reduced legal market share and the re-emergence of grey or black market operators.

For example, markets such as Sweden and Germany have seen challenges in maintaining channelisation — the percentage of gambling activity that occurs within licensed, regulated systems — following major tax hikes or regulatory overhauls. These precedents suggest that the Dutch experience is part of a broader trend, reinforcing the need for careful, evidence-based policymaking.

Need for a balanced approach

Stakeholders across the Dutch gambling ecosystem increasingly agree that the current regulatory and fiscal regime may require recalibration. The goal of enhancing consumer protection is valid and necessary, particularly in a rapidly evolving digital market. However, this must be weighed against the economic realities of the sector.

A viable legal gambling market hinges on a regulatory environment that fosters responsible innovation while allowing for commercial sustainability. Taxation policy plays a pivotal role in determining whether legal operators can offer products that are attractive enough to prevent consumers from turning to the unregulated market.

Conclusion

The recent developments in the Netherlands illustrate the unintended consequences that can result from well-intentioned but economically misaligned policy decisions. The increase in gambling tax from 30.5% to 34.2% was designed to enhance public revenues but has instead contributed to a contraction in legal gambling activity and a surge in illegal play.

Regulators and lawmakers must now consider whether the current framework is sustainable. Evidence suggests that overly burdensome tax rates — when combined with strict regulatory rules — can drive consumers away from the legal market, undermining both public safety and fiscal goals.

Industry representatives such as VNLOK and regulatory bodies like the KSA have offered constructive proposals for reassessment. These include freezing the tax rate, increasing enforcement against illegal operators, and developing a long-term policy roadmap that supports a robust and responsible legal market.

In a sector as sensitive as gambling — where consumer vulnerability is high and public opinion is often divided — policy decisions must be data-driven, legally sound, and economically realistic. A recalibrated approach could restore confidence in the system and ensure that the Dutch gambling market remains both secure and sustainable.

FAQs

What prompted the Netherlands to increase gambling tax in 2025?
The Dutch government increased the gambling tax rate from 30.5% to 34.2% in January 2025 to generate additional public revenue from the growing gambling sector.

Has the tax increase boosted government revenue?
No, despite the higher rate, gambling tax revenues decreased by €30 million in the first half of 2025 compared to the same period in 2024 due to reduced legal gambling activity.

How has the tax hike affected legal operators?
Licensed operators face increased financial strain due to higher taxes and strict regulations, making them less competitive against illegal platforms.

Are more players turning to illegal gambling platforms?
Yes, around 50% of online gambling activity is now believed to occur through unlicensed operators offering higher payouts and fewer restrictions.

What does the KSA say about the situation?
The KSA has warned that the tax hike undermines the long-term sustainability of the legal market and could jeopardize player protection efforts.

How are land-based casinos affected?
Land-based operators have seen a 9% drop in gaming locations in early 2025, suffering more due to limited ability to adapt to higher costs.

What solutions has VNLOK proposed?
VNLOK suggests freezing the tax rate at 34.2% while reviewing its effects, alongside stronger enforcement against illegal gambling operators.

Is this problem unique to the Netherlands?
No, similar challenges have been observed in other countries like Sweden and Germany, where tax increases reduced legal market participation.

Why is a balanced approach important?
A tax and regulatory framework that supports legal operators is essential for maintaining consumer protection and channeling activity away from illegal markets.

Could the tax rate be reversed or lowered?
While not currently proposed, ongoing assessments could lead to policy adjustments if the negative impact continues to outweigh the benefits.