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Anton Kuchukhidze: Excessive tax burden drives up the illegal gambling market

The legal gambling market, like any other business sector, is extremely sensitive to the regulatory environment and tax system. These two factors affect the efficiency of a business and the attractiveness of a particular economy for investment. International practice shows that excessive taxation of gambling results in the degradation of the legal market and increase in the number of illegal gambling establishments.

In this context, the current situation in Georgia is indicative. Last December, the Georgian government adopted a series of amendments to the regulatory and tax laws, thus increasing the fiscal and regulatory burden on the legal gambling market. According to the Georgian government, this was done to increase state budget revenues and to strengthen control over the sector to fight against gambling addiction. It increased the tax burden by 65-70%, and the requirements for player verification were dramatically tightened.

In practice, however, increased tax and regulatory burden has backfired.

1. The tightening of the player verification rules has led to the more extensive use of illegal gambling services. According to representatives of Georgian companies, despite the fact that the legislative changes have become effective only in part, the number of illegal online gambling platforms in Georgia has already begun to increase. At the same time, the number of legal users decreased by 20-25%.

2. Increasing tax and regulatory burden with a simultaneous outflow of clients placed legal operators at a considerable disadvantage and simultaneously created serious financial pressure on their business. As a result, they have to suspend investments, move away from financing sponsorship and charitable projects, dismiss a number of employees and take other counterproductive measures to save resources.

What does it mean?

Inadequate fiscal burden leads to a reduced legal market and a decreased positive economic effect of licensed gambling. At the same time, the demand for gambling services is always there, and it is illegal operators who are ready to meet it. This, in turn, leads to the loss of funds in the form of license fees and taxes by the State, disregard for the responsible gambling principles, and a higher number of risks for gamblers.

At this stage, the issue of adequate taxation is more relevant than ever to the Ukrainian legal gambling market, since today the industry functions within the framework of the tax legislation adopted during the ban on gambling.

That is why the entire market is waiting for the adoption of the specialized draft law 2713-д that will regulate a number of key issues related to income tax, GGR and tax on winnings.The adoption of the law as drafted will not only allow legal business to develop faster and more efficiently, but will also be a great misfortune for illegal actors, leading to an outflow of players from their gambling establishments and online platforms.

The legal gambling industry in Ukraine managed to show strong performance in just a year and make a positive impact on the Ukrainian economy. In order not to repeat the negative experience of Georgia, we need to adopt draft law 2713-д as soon as possible, providing a significant boost to even more dynamic development of the legal market.

Anton Kuchukhidze, Chairman of the Ukrainian Gambling Council, exclusively for the “Ukrainian News”


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