UPDATE 2-Betfair pulls back from Germany over gambling tax
* Betfair pulls main product from German over tax
* Gaming companies unhappy over 5 pct level on sporting wagers
* Some focusing expansion efforts on other parts of Europe
By Keith Weir
LONDON, Nov 7 (Reuters) - Betfair Group Plc has withdrawn its online sports betting exchange in Germany, blaming a 5 percent turnover tax for making its main product unviable in Europe's largest economy.
Other British-listed gambling companies have also cried foul over a tax levied in Germany on stakes on sports events from July 2012.
Companies in the growing online gambling market complain of a patchwork of different regulatory regimes and tax systems across continental Europe. They are focusing their expansion efforts on those countries where there are clear rules and less onerous tax regimes.
Betfair, which launched 12 years ago and operates an exchange system that allows gamblers to bet against each other rather than the bookmaker, argued it should not have to pay the German tax.
Germany is a relatively small part of its business, accounting for around 4 percent of core revenue in its last financial year.
"The company is disappointed that to date the tax authorities have not been able to agree to an interpretation of the law that would allow Betfair to continue to offer the exchange product," Betfair said on Wednesday.
"Consequently, Betfair has decided to withdraw its exchange product from the German market," it added.
Betfair said contributions from Germany would be minimal following the withdrawal of the product. Besides the sports betting exchange, it also offers poker, casino and more traditional fixed-odds betting there.
Betfair shares initially opened lower but recouped the losses to trade 1.8 percent higher at 765p by 1020 GMT.
Analyst Nick Batram of brokerage Peel Hunt said he had already factored a German withdrawal into his forecasts after previous statements from the company.
"We believe that there is the potential to create a much leaner and meaner business, with the unique exchange platform at the core," said Batram, who has a "buy" rating on the stock.
William Hill, Britain's largest bookmaker, said it no longer offered any kind of service to German residents because of the tax situation.
"We remain licensed in Spain and Italy, and have recently developed a Swedish language website and started advertising in print and broadcast media there," spokeswoman Kate Miller said.
Bwin.party, the world's largest online gaming group, said last week that the German tax had contributed to a decline in revenue in the third quarter.
Bwin has amended its business model in Germany, its largest market, by no longer accepting very short-odds bets on sports events there.
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