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"There is a paradoxical situation in Ukraine" - Ganna Buiadzhy on the gambling market


Honored Lawyer of Ukraine Ganna Buiadzhy in an interview for Gamingpost.net told how to solve the problems of the gambling market in Ukraine.
  • Interview
  • 2021-05-10 10:58:04
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"There is a paradoxical situation in Ukraine" - Ganna Buiadzhy on the gambling market

Many experts cite certification and taxes as the main problems for launching a gambling market in Ukraine. Do you agree with that? How can you speed up the startup process?

Both questions are relevant and problematic today.

As you know, the world practice of gambling regulation is such that the state imposes either high taxes or high fees for a license. In Ukraine, so far a large amount of payments has been established for both the first and the second.

This situation, to put it mildly, scares investors because when calculating the financial model of an enterprise, they are not sure that the business will be profitable due to the high tax burden.

As of today, the following tax burden is envisaged:

  • tax on income from winnings and prizes - 18% of the total amount of winnings (prizes) paid to players;

Income tax from:

  • gambling - 18% (including casinos, bookmakers);
  • use of slot machines - 10%;
  • issue and conduct of lotteries - 30%.

In addition, on this basis, the legislation does not take into account the profitability of various types of gambling businesses. In the same bookmaker, it is much lower, which means that the tax rate could be lower, and not at the level of the casino.

By comparison, in the UK, tax (GGR) is 15% on business profits up to £2,370,500 (pounds sterling), and up to 50% tax on profits over £2,370,500. At the same time, the tax rate on winnings is 0%.

It is also worth considering the tax burden on the payment of wages to employees and the cost of the license itself, which, before the introduction of the online monitoring system, costs three times more for online casinos and bookmakers.

The problem of equipment certification has not yet been completely resolved. After all, the list of equipment that is subject to certification was finally approved, but the technical regulations according to which such equipment should be produced and put into operation is still under development, and this is the key document without which neither operators nor certifiers can fully work, no manufacturers.

With the aception of the list of subjects of certification, a situation has developed when companies from the list are not ready for the certification, and many operators already have certificates from other companies that are not included in the list. What can be done in this situation from a legal point of view? How do operators behave?

According to the Law of Ukraine "On State Regulation of Activities for the Organization and Conduct of Gambling", the subjects of certification are foreign and/or Ukrainian business entities that can certify and inspect gaming equipment by the law, accredited by the national accreditation body of Ukraine or whose accreditation by a foreign body accreditation is recognized based on an international agreement of Ukraine for compliance with the requirements of ISO / IEC 17020 (ISO / IEC 17020) and ISO / IEC 17025 (ISO / IEC 17025) or other standards that replaced them for certification and inspection of gaming equipment.

Thus, the law provides that there can be both Ukrainian and foreign companies. At the same time, the list approved by KRAIL is at least strange, because it includes companies that, to put it mildly, are far from the sphere of gambling. Let me remind you that they are: Zaporizhzhia Scientific and Production Center for Standardization, Metrology and Certification; Research and Production Center "Kievstandartmetrology"; State Enterprise "Ukrainian State Center of Radio Frequencies"; Vinnytsia Research and Production Center for Standardization, Metrology and Certification and Etalon Private Enterprise. Some of them have experience in the certification of gaming equipment in the distant past (before the ban on gambling), and some have only a vague idea about it.

There are recognized giants in the world that certify gaming equipment in many countries that are not included in this list. These include, for example, Gaming Laboratories International (GLI®) and BMM Testlabs. Although, in fairness, I note that none of the international companies got there, not only these. So what is it - lobbying for a "domestic manufacturer" or unwillingness (inability) to agree with foreign companies that have been professionally and specialized in certification in the field of gambling for many years? As for me, it is not clear. But I hope that in the future such companies will still enter the gambling market in Ukraine. I am for a transparent and understandable market.

In addition, as already mentioned, the Technical Regulations that the equipment must meet have not yet been adopted, which means that even the companies that are already on the list will still not be able to carry out certification, even if they were ready.

Do foreign investors turn to you for advice? What problems are they most worried about?

Of course, they do. Most foreign investors want clear and stable rules of the game, which are still in development.

The opinion of investors is always influenced not by one, but by a combination of factors. Among them, first, such questions:

  • high tax rates and a lack of understanding whether they will change;
  • high cost of licenses;
  • the protracted process of developing the regulatory framework (the procedure for certification and launching the online monitoring system), which affects the size of the state payment for the license;
  • lack of incentives to invest in the sector, such as a temporary reduction in the tax burden or a simplified process for obtaining a license, etc.

Now in Ukraine there is a paradoxical situation. On the one hand, KRAIL systematically reports on the licenses issued and, which is important, on the money transferred to the state budget. On the other hand, it is impossible to conduct a legal business, since there is no possibility to certify the equipment, and without this any activity in the field of gambling is illegal. Unless you can advertise yourself legally. But companies must surely pay such fabulous sums (and some companies - in three times the amount) not just to post ads. Business must bring in money, but for now in our country for gambling, alas, this is impossible. Therefore, until the state can provide transparent working conditions, gambling will continue to be mostly in the shadows.

The interview especially for Gamingpost.net

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