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Why is the introduction of the SOMS without the adoption of tax changes meaningless?

Both representatives of the legal gambling market and the national regulator support the introduction of the State Online Monitoring System (SOMS). In addition to the real advantages provided by SOMS, its establishing is also necessary because it is required by legislation. This mechanism will finally remove all manipulations related to the real amount of taxes paid by licensed organizers, and will also contribute to a more effective fight against illegal businesses. However, the introduction of the SOMS will have a real effect only with the simultaneous introduction of relevant tax changes.

I repeatedly emphasized the need to introduce the SOMS and explained in detail its advantages for the market and the state, but the system must be introduced simultaneously with introducing changes to the tax legislation for the gambling sector.

On the one hand, there are all conditions for this. The Commission for Regulation of Gambling and Lotteries (CRGL) actively advocates the introduction of the system, making appropriate efforts within its powers. Representatives of legal gambling businesses support the SOMS as well, understanding its importance for simplifying reporting to the state.

However, not everything is as rosy as it might seem at first glance. Introduction of the SOMS alone will not be sufficient to improve the regulatory environment in the legal gambling market. Moreover, the introduction of the SOMS without tax changes will lead to the closing of the market. And let me explain why:

Problems in the regulation of gambling business taxation are caused, among other things, by the fact that relevant clauses of the Tax Code of Ukraine were adopted back in December 2016, when the gambling business was completely banned.

Anti-social and unfair approaches were established at that time, which forced players to seek out and choose illegal gambling establishments as an alternative.

Provided that the state online monitoring system is put into operation, without making changes to the Tax Code of Ukraine, the following forecasts can be made:

1. Existing gambling organizers in slot machine halls will be forced to cease their activities, as the tax burden will exceed the gross income from such activities.

2. The market of land-based legal gambling establishments will be closed. New organizers (including large international companies) will not enter the market with absurd tax regulations.

3. Players, in the absence of a choice, will use the services of illegal businesses, which will further activate the underground gambling market.

There is no need to be afraid of understanding that monitoring operations of legal gambling organizers with the help of SOMS will be meaningless without the adoption of relevant tax changes proposed by draft Law 2713-д. Increasing the amount of taxation of gambling operations under the effective tax legislation will only lead to the outflow of players from licensed gambling operators and the rapid disappearance of the market. That is why the introduction of SOMS and the adoption of draft Law 2713-д should be done simultaneously.


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