Ministry proposal looks like sure bet for gaming industry groans

A balancing act between social and revenue goals has been trod by the Ministry of Finance in putting together a proposal for how to tax the multifaceted gaming sector. Not surprisingly, most of the main players do not appear too happy about the figures that it has come up with.

Photo: Barbora Kmentová

In Benjamin Franklin’s famous words, the only certainties are death and taxes. The taxes themselves though come in all shapes and sizes, but they are often target products which damage health, such as tobacco and alcohol, and which also have a certain addictive quality so that the tax base will not be dented too much.

Betting or gaming joins the categories of products that are sometimes targeted on health or social grounds with the knowledge that anything but punitive tax levels will mean that many of the ‘addicts’’ will continue to stay around.

The Czech Ministry of Finance has just come out with its proposal for the future taxing of the gaming sector. And it clearly has not been an easy task.

On the one hand the social ills of gambling addiction, such as higher rates of theft, social exclusion, and suicide are noted. But at the same time the authorities admit that while wanting to boost tax revenues from gambling, they do not to drive it out of existence. The result is a proposed new tax regime for gaming that expects to earn an extra 5 billion crowns a year in tax revenues from the start of 2016.

The proposal going to the Cabinet next week is a milder version of some of the tax changes originally being mulled at the end of last year. The ministry is even suggesting that the tax rates on betting at bookmakers, for example on sports results, falls from the current 30 percent to 25, with the rates on slot machines, such a one hand bandits, being reduced from the existing 40 percent to 35 percent.

The rate on lottery games, dominated by the Sazka lottery which is now part of the travel, energy, telecoms, and gaming empire of Czech billionaire Karel Komárek, would however stay unchanged at the 30 percent rate.

Czech media reports points out that Sazka’s profits will likely plunge by several hundred million a year with gaming taxes paid to the state, which totaled 690 million in 2013, likely to rise to more than a billion crowns when the new rules come into force.

Sazka itself obviously feels that it is being unfairly victimized and adds that lotteries are not usually the worst offenders in the gaming industry’s hall of shame. The odd flutter on a number that might transform your life is a form of escapism shared by hundreds of thousands and is not so addictive to cause social problems.

The betting companies, while media reports suggest they might secretly be quite pleased with the ministry proposal, point out officially at least that the average Europe tax rate on the sector is around 18 percent and an even lower figure might be appropriate for the Czech market because it comparatively small.

The main association representing gaming machines operators, Spelos, has warned that that the ministry’s original proposal for a state tax at 40 percent and 40,000 crown charge on each machine would have driven many operators out of business with tax revenues dropping by billions of crowns. The milder ministry proposal has not noticeably diluted its opposition.