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"Approval of a tax law is vital" - Igor Makievsky on Bill 2713-d, taxes on winnings and gambling income


The Verkhovna Rada voted for bill 2713-d in the first reading. Now the document is awaiting a vote in the second reading in the fall. Why is the bill vital to the industry? How do licensed casinos work without regulated taxes? And why has the demand for slot machines dropped? Igor Makievsky, head of the All-Ukrainian Association of Employers in the Leisure and Entertainment Industry, answered these questions, especially for Gamingpost.net.
  • Interview
  • 2021-07-20 10:47:14
  • 26
"Approval of a tax law is vital" - Igor Makievsky on Bill 2713-d, taxes on winnings and gambling income

Igor Anatolyevich, what does the adoption of 2713-d in the first reading mean for the Ukrainian gambling market?

The adoption of this law is vital for the gaming market to fully launch. Without this law, the legal market cannot function normally. You can work legally, but you cannot earn money. If you work according to the current tax code, then a legal business is doomed to losses. This is how the norms are spelled out. Therefore, a legal business has two options: either to open legally and close due to the unprofitable business, or to open legally and go into the shadows. Neither one nor the other is unacceptable.

What exactly is wrong with the current tax code regarding gambling?

The current tax code spelled out the rules of taxation of the gaming business from 2016. At that time there was no law on the legalization of gambling, there were no additional tax burdens in the form of licenses and a new taxation system. Now, the tax burden on the gambling business is spelled out in two regulations. Part of the tax burden is spelled out in the law on legalization in the form of the cost of licenses. And the tax code spelled out the second part of the burden - taxes. And when the current code is combined with the law, taxes are not balanced. In the current tax code, concepts such as income from gambling business and, accordingly, tax on income and on winnings are formulated incorrectly. For example, in the current tax code, the concept of "income" practically means "turnover". And when it comes to the fact that income is taxed, then in fact the turnover from the gaming business is taxed. There is a substitution of concepts. It's the same with winning. Now the entire amount of payments is considered a win, which is wrong. For example, if a player bets 1000 hryvnias on the victory of the Italian national team with odds of 1.1, then if his bet plays, he will win 100 hryvnias. Then the bookmaker must return 1000 hryvnias of the bet and 100 hryvnias of the winnings to him. But according to the current tax code, the entire payment is considered a prize, in this case, 1100 hryvnias. Winnings are taxed at 19.5%. That is, from these 1,100 hryvnias, the tax will amount to 214.5 hryvnias. It turns out that the player won his 100 hryvnias. And they say to him: "No, we will not give you 100, but from you another 114.5." And as a result, the player will receive 885.5 hryvnias in his hands. And the state says: "So you won, why aren't you happy?"

How does bill 2713-d change the tax situation for the gambling business?

Bill 2713-d resolves two issues. First, it balances tax figures. The amount of taxes and deductions takes into account the cost of licenses. And it is right. Secondly, 2713-d prescribes the correct conceptual apparatus: what is income from the gambling business, income tax, what can be considered income and what can be considered as a win. In addition, in 2713-d it is stated that the winnings equal to 8 minimum wages and below are not taxed. Anything above is taxed, but taking into account the costs that the player has incurred in connection with this win in the last 24 hours. This is also correct because you need to calculate how much the player has spent due to the fact that he won. He can spend money on the game several times, and win after a long time. All this is taken into account and affects the correctness of determining the amount of the win. The business is happy with these edits. This is definitely better than it was. At the very least, this will allow the market to be fully launched. And six months or a year later, the market will regulate itself.

Four land-based casinos have already opened in Ukraine. How do they work now, without changes to the tax code?

Today, all openings of land-based casinos and gambling halls are political. There is practically no economy there. Western business is not entering Ukraine now. People cannot draw up an ordinary business plan, they simply cannot calculate the profitability of a business. Because the tax system is not balanced. Those who are opening now are pioneers, they are always and everywhere. They expect that the tax issue will be settled in the time they open. And they expect to be first, earn more and cover all costs and expenses.

During the discussion of the bill 2713-d, the opposition parties announced that they would not vote for the document, because it “lowers” ​​taxes for the gambling business. How can you comment on such statements?

The so-called oppositional opinion shows the complete incompetence and unwillingness of politicians to understand the situation. What they are relaying is not true. And they mislead themselves, their colleagues, and the people who listen to them. Many shout that they are cutting taxes for the gaming business by three times. They are referring to the elimination of the triple license fee. Now, according to the law, there is a tax on income, but it is not paid, because, in the original version, an online monitoring system was expected. This system should administer this tax and monitor its collection. But until the system is created, it was decided to introduce a coefficient of 3 to a certain type of license to compensate for the budget losses associated with the fact that they do not collect taxes. The entire cost of licenses for bookmaking, for online casinos, for each gaming table is now multiplied by three. But later they decided that it would be wrong not to levy taxes. And they introduced bill 2713-d the obligation to pay income tax. Because of this, coefficient 3 on the license, which was introduced as a compensator, is removed. And they bring the system into balance. Removing coefficient 3 does not mean that the taxes on the gaming business will be cut three times, as some MPs say. On the contrary, the result is a balancing of the tax system. The cost of licenses is taken into account, which is huge in our country. Since we pay for such licenses, it means that they must be balanced with tax rates, which must be adequate to the cost of licenses. 2713-d solves that. But this cannot be called a tax reduction, relaxation and almost preferential taxation for the gaming business. This is completely different.

Can you give an example of how the lack of correct taxation affects the market?

To date, a confirmation that the system is in imbalance is the number of licenses issued for slot machines. Even before the adoption of the law on the legalization of the gambling business, there was a discussion about how to make sure that slot machines were not on every corner. It was proposed to introduce a limit of 40 thousand machines for the whole of Ukraine. Based on 1000 people for 1 machine. At the time of the closing of the gambling market in 2009, the market capacity in Ukraine was estimated at around 200 thousand machines. Therefore, they were going to establish a restraining limit of 40 thousand machines for the whole of Ukraine. It was believed that there would be much more people willing to bring in and place machines. But today the law has been in effect for a year, and a little more than 1,000 machines have been licensed. 40 times less than expected by the most pessimistic estimates. The imbalance of tax and administrative complex regulations has led to the fact that there is no demand.

According to your forecasts, will there be problems with voting for 2713-d in the second reading in the fall? Will they accept him?

Of course, they will, because otherwise it will be the collapse of all legalization when you can work, but you cannot earn. Why then was this whole story about legalization, why these beautiful words about budget revenues? To date, only a tenth of what was planned has been received in the budget. It is because of the complex regulation and unbalanced tax system. Because of this, potential investors do not enter as actively as expected. With the adoption of 2713-d, the second wave of obtaining licenses, demand and activation of business, both Ukrainian and foreign, will come.

The interview especially for Gamingpost.net

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