How The Gambling Industry Operates After Legalization

So far, only four companies have received licenses from the state to conduct gambling. The rest either took a wait-and-see attitude or did not want to leave the “shadow” at all. About what happens to the gambling industry after the adoption of the law on legalization and what taxes they want to impose on it – below in the material of RBC-Ukraine. The legalization of the gambling business was one of the first points in the plans of the team of Vladimir Zelensky after coming to power. The raids staged by law enforcement officers in December 2019 at the initiative of the president had a short-lived effect. This helped the MPs find the missing votes for the adoption of the law in the first reading. But many gambling establishments, which then closed their doors, soon returned to underground work anyway.

In July last year, the ruling team succeeded in passing a law on the regulation of gambling. According to the document, those wishing to work legally must obtain licenses and pay taxes to the budget. But the market, which has been in the “shadow” for ten years, is not eager to accept the conditions of the state. Since the conditions themselves, on the one hand, are not beneficial to everyone. On the other hand, they are not completely clear. Rada is going to pass an additional law on the taxation of gambling and lotteries. The MPs laid down in the document some “concessions” for the industry, which could push companies to work legally. Although this is far from the only reason forcing the gambling business to stay “underground”.

White spots

The legalization of gambling in Ukraine is moving at a slow pace. Among the reasons are bureaucratic red tape, business inertia, and gaps made by the state. At the end of September, the Cabinet of Ministers began to form the Commission for the Regulation of Gambling and Lotteries (KRAIL). Due to the ban on recruiting employees to new bodies, the Commission is working with a cut staff, says its head Ivan Rudy. KRAIL must control market participants and issue licenses to them. The government approved the conditions for their receipt only at the end of the year. Licenses cost a lot. The cheapest will be the permission to organize online poker – 23.6 million hryvnia. The largest amount will have to be paid for the opening of a casino like Malaysian online casino. In addition, an annual equipment fee must be paid. Rudy estimates the market potential at 6-7 billion hryvnia of budget revenues per year. “For February, we set a plan of 70.2 million hryvnias from licenses. As of February 25, this plan was fulfilled, that is, we brought such a sum of money to the state budget. Next month I have a plan of 150 million hryvnias, given the current situation, it is real. It is difficult to predict in more detail now, “the head of KRAIL told RBC-Ukraine.

Money question

Last summer, the Rada’s finance committee has already approved the wording of the bill on taxation of gambling, which is recommended to be put to a vote in the hall. The document proposed setting a zero rate for the gambling business until 2024 and a reduced 5% rate for bookmaking. All winnings were exempt from taxation. The deputies wanted to compensate for all this at the expense of the triple cost of licenses, which the business must pay until online monitoring works. But in the end, the relevant committee decided to rewrite all this and draw up a new bill on taxes (2713-d). In it, the deputies, firstly, proposed to exclude the taxation of winnings if the prize is more than 8 minimum wages (now 48 thousand hryvnia). Secondly, the document excludes the rule on the triple cost of a license for companies. Third, in addition to corporate income tax, they must also pay income tax (on gross gambling income). We are talking about GGR – the difference between bets and winnings. It is proposed to make the rate of this tax the same for all types of gambling business – 10% of gross gambling income. But this will reduce the tax rate for bookmakers and casinos from 18% to 10% of gross income. And for lottery operators – from 30% to 10%. There is no unanimity on this issue in the committee. “Personally, I did not support such a decision and voted against it. I think it is wrong that we are so reducing taxes on the gambling business. In particular, on lotteries. In fact, the tax will be 3-5% of the lottery ticket. This is too little and unfair, for my look “, – explained the member of the financial committee Marian Zablotskiy.