Ukraine Gaming Operators Frustrated as Government Delays on New Tax Structure

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Ukraine Gaming Operators Frustrated as Government Delays on New Tax Structure

The Verkhovna Rada’s final hearing on the Tax Bill of the Ukraine Gambling Law was postponed until the end of November. While it is normal that legislative bodies delay finalizing bills, Ukraine has been sitting on this one since August.

Verkhovna Rada
Verkhovna Rada
Ukraine’s government is in session, although it appears to have difficulty giving final approval to a gambling tax bill. (Image: Verkhovna Rada)

Although the final hearing and judgment on tax amendments were supposed to be passed by November 10, stakeholders from Ukraine have not seen any precedent in this matter. The Verkhovna Rada, Ukraine’s national government, approved the new framework last August. However, its failure to resolve the Gambling Law’s tax and technical issues has left domestic operators frustrated. That’s while international entities looking to possibly get involved remain in a holding pattern regarding entry to Ukraine’s reformed gambling market.

The Rada is slowing down the legislative progress by determining that it needs to review all tax proposals, despite Ukraine’s Committee on Finance support for Tax Code 27/13D. The amendment received overwhelming majority approval from MPs during its first summer reading, but has not been able to progress since.

Rules and Regulations Already Approved

The Committee on Finance supports a flat 10% industry rate for all regulated gambling verticals. They also support the Gambling Law’s elimination of its previous ‘triple-lock’ licensing fees. This could, eventually, lead the country to not deal with black-market casinos that pop up almost anywhere.

Boris Baum, a councilor of the Ukrainian Gambling and Lotteries Regulation Commission, stated at this Winter’s SBC CIS Summit that it was urgent to address outstanding Gambling Law tax and licensing requirements. That’s so Ukraine’s market can be attractive for foreign investors.

Ilya Machavariani, CEO and senior partner at CIS law firm 4H Agency, is also watching the  developments. She commented that it seems that the hearing for the Tax Bill in Ukrainian parliament has been delayed until the very end of November. That’s despite earlier anticipations that it would be heard before November 10.

The full scope of reasons for this delay is unclear, but at least it seems that the delay is not connected [to] doubts over the particular Tax Bill; it seems that it is more of a story when the Parliament has diverted its attention to other issues that are now on the top of the agenda,” said 4H Agency CEO Ilya Machavariani.

Only One Step Remains

Everything is in place for the new framework to be implemented, which makes the delays more than a little confusing. Operators will be required to pay an 18% corporate tax rate. Player income will be taxed on gambling winnings exceeding UAH48,000 ($1,804) for more than eight months.

The Gambling Act in the country had previously mandated that online gaming and betting license fees be three times higher than usual. These fees would be reduced only when an online player monitoring system was established. The new tax bill eliminates this requirement.

Establishing a better framework for any gambling market is always a challenge. But it can go a long way to ensuring everyone plays by the rules, including those meant to oversee the activity. This past August, the man tapped with helping improve Ukraine’s gambling market was detained for his involvement in illegal gambling. The unidentified gambling commissioner was caught red-handed trying to facilitate illegal gambling by receiving bribes from would-be black-market entrepreneurs.

That didn’t help the country’s perception of gambling, which had only been legalized a year earlier. Gambling was outlawed in 2009, but then revived last year as a means to boost the country’s economy. With predictions that the government could earn as much as $200 million in tax revenue from gaming, it needs to get over this final hurdle to get the market in motion.

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