The Remote Gambling Association (RGA) have called on the Portuguese government to rethink its draft online gambling legislation after deeming the proposed tax framework "unworkable".
The Portuguese parliament are expected to make a decision on the i-gaming bill – which intends to liberalise the market by granting licences to foreign operators for the first time – by 10 July.
But online gambling trade organisation the RGA has said that while it welcomes Portugal's initiative to regulate its online gambling market, it is concerned that the punitive tax rates have the potential to create "a situation of substantial illegal state aid" to the country's state-run offline operator Santa Casa Misericordia de Lisboa (SCML), which currently monopolises the market and runs the national lottery.
The present draft law proposes punitive taxes of 8-16% for online sports betting, whereas SCML will face only half of this tax burden.
Clive Hawkswood, CEO of the RGA, said: "Our members are extremely concerned about the unworkable tax rates that are proposed in the draft law currently being considered.
"The extend of the disparity in tax burden between licensed online sports betting operators and the offline monopoly operator could be as much as 50% in favour of Santa Casa.
"Such a differential has the potential to create a situation of substantial illegal state aid being granted by the Portuguese government while also destroying any hope for fair competition in future regulated online sports betting."
The RGA believes such a severe hindrance on fair competition will detriment the country's consumers and tax revenues and render the market unviable and unattractive to online operators who might otherwise decide to apply for licences and invest in Portugal.
While foreign internet betting platforms are currently prohibited in Portugal, there are a plethora of English-language race and sports-betting websites that offer wagering opportunities to Portuguese addresses as well as others that support the Portuguese language, including Bet365 and Ladbrokes.
After receiving a €78bn bailout from Troika, the tripartite committee consisting of the European Commission, IMF and ECB in 2011, the potential tax collections from an appealing and well-regulated online betting market are much needed in Portugal. Especially when Santa Casa makes limited tax contributions to the struggling economy due to donating its profits to charitable causes.
Hawkswood said an "opportunity to engage in constructive dialogue" with the Portuguese government would be welcomed by the RGA, with the intention of ensuring a "level playing field for all online sports betting operators to obtain licences."