Any dynamically developing economy sector always makes some representatives of the political elite covet to collect as many taxes from it as possible. Unbalanced taxation and over-regulation usually have the opposite effect, namely reduced tax revenues, increased illegal sector of the business, and a declining industry. This is exactly what is happening with gambling in Georgia.
Once in Ukraine, Georgia was held as an exemplary state that successfully reformed its gambling industry and ensured the rapid growth of this entertainment industry segment. Indeed, in the first years after the gambling legalization in Georgia, the industry demonstrated steady growth and high profitability and contributed to the development of related economy sectors.
Powerful international brands began to enter the Georgian market, bringing to the country millions of dollars of investment, thousands of jobs, and Western approaches to doing business.
Unfortunately, things have dramatically changed. Pursuing populist goals and disregarding business interests, in December 2021, the Georgian parliament adopted amendments to tax and regulatory legislation increasing the regulatory and fiscal burden on the legal gambling market.
These new amendments took effect this spring but have already led to an 18% reduction in the income of gambling operators in Georgia. As a result, companies have been forced to cut costs, including terminating sponsorship projects and social responsibility initiatives, laying off personnel, and shutting down entire business areas. Company revenues have fallen, just like deductions to the state budget.
Another negative trend of increased pressure on legal gambling was the increase in the number of illegal market players, especially in online gambling. The reason for their rise is a significant tightening of requirements for gamblers’ identification and verification, as well as taxation of winnings. It resulted in an outflow of players from legal online platforms and halls to illegal ones, and this trend is only getting worse. Georgian experts predict that if things do not improve, the Georgian legal gambling market will lose about USD 680 million a year.
I focus on Georgia’s example in such detail to demonstrate that tax and regulatory legislation is the basis of any market. As we see, the one-sided path of tightening the screws in business by the Georgian government has had the opposite results, and now the existence of the entire industry, and thus part of budgetary revenues, is a big “if”.
This example shows why it is crucial for us in Ukraine to promote a favourable tax environment for legal gambling operators. Without the adoption of the specialized tax draft law 2713-d, the full-fledged gambling market legalization will fail, constraining the full potential of revenues for the state budget.
Without clear tax legislation, any investment from recognized gambling brands will be off the table. That is why the creation of favourable conditions for the market development and prevention of Georgia’s negative experience requires adopting tax draft law 2713-d as soon as possible. It will turn legal gambling into a full-fledged industry and increase its investment attractiveness.
Anton Kuchukhidze, Chairman of the Ukrainian Gambling Council, exclusively for the Ukrainian News