Russia’s Taxes on Gambling Increase for a 5th Straight Year

Wednesday, June 8th, 2016 | Written by April Bergman
Russia’s Taxes on Gambling Increase for a 5th Straight Year

Betting Business Russia released statistics this week which showed Russia’s gambling taxes increased for the fifth straight year. Despite the incremental increases in gaming revenues, the numbers pale in comparison to those obtained before the Putin government banned most forms of gambling in the Russian Federation.

The Russian Federation’s gaming taxes last year amounted to $9.7 million, which was a 17% increase over 2014’s taxes. The 2015 numbers were a 35% increase over the 2013 tax revenues, so there are clear signs that Russia’s taxation of gambling is increasing. Since the tax rates are not known to have increased significantly, that’s a sign that legal gambling activity is increased.

Russia’s Old Casino Economy

Unfortunately, the picture of gambling in Russia for the last 3 years is only a snapshot. If one looks at the wider picture, Putin’s government has squelched most gambling in the world’s largest country by land area.

In 2008, Russia collected $519 million in gaming taxes. Despite a 2006 proclamation against land-based casinos in Moscow, gambling was still allowed to a large degree throughout much of Russia.

Then Vladimir Putin’s government, citing a need to curb immoral activities like wagering, decided to close all casinos in the population centers of Russia. Instead, casinos would be confined to four special administrative regions found on the edges of Russia’s vast landmass. Gambling went from an activity for the Russian mass market to a pastime for Russians who could afford holidays to the far-flung areas of the country. In short, casino gambling became an activity for the rich.

Legal Sportsbooks in Russia

Though casinos have been closed, licensed bookmakers remain a key part of the gaming economy. 49% of all gaming revenues came from taxation on legal sportsbooks. The Russian Federation has 4,664 licensed betting offices through the country. Roughly 35% of those offices are located in the Central Federal District, an area which includes the capital city of Moscow.

Casinos in the four gaming enclaves collected 42.7% of the revenues. Those revenues came from Azov City on the Black Sea coast and Altai, which  is situated roughly between Kazakhstan and Mongolia.

The Primorsky District near Vladivostok in the Far East is expected to contribute much larger tax revenues in 2016. The Tigre de Cristal, a Primorsky casino owned by Chinese gambling mogul Lawrence Ho, only collected significant revenues in November and December 2015, after opening late in the year.

Primorsky Region and Tigre de Cristal

Tigre de Cristal is thought to be drawing many Chinese high rollers from Northeastern China, especially Beijing. The world’s largest gaming destination, Macau, has seen many of its Chinese high rollers leave for better gaming environments. With the collapse of the Macau junket industry, the high rollers cannot get the kind of loans needed to gamble for high stakes in Macau. Also, access to Macau is limited.

Russia has some of the lowest gaming taxes in the world. Instead of collecting a percentage of winnings or revenues, Russia collects a set fee on each gaming machine or gaming table, regardless of the revenues collected. Operators pay $117 a month for each gaming machine. They pay $1,945 a month for each gaming table. With any amount of activity, gaming profits should be huge for most casino owners.

Online Processing Fees

The remainder of the tax revenues from gaming come from processing fees in the online gambling industry. This is not a large part of the tax haul, representing a little over $800,000 a year. About $500,000 of that comes from processing fees on the online sportsbooks.

Under new provisions of the TSUPIS law, the fees on such transactions are going to increase exponentially. Also, a 10% tax on all online gambling revenues is going to be enforced going forward. Despite the imposition of new taxes, these are not considered prohibitive. The United Kingdom charges 15%, with The Netherlands charges 20% and the Czech Republic 30%. Thus, Russia’s online gambling taxes can be seen stepping into the 21st century.

Gambling Effect on Russian Society

If only the same could be said of the rest of Russia’s gaming laws. The lost half-a-billion dollars each year seems like a lot, but the Russian Federation might have decided it was hard to collect casino taxes. Or perhaps the gaming laws were motivated by a real sense of concern for Russian citizens.

These days, Vladimir Putin relies more than ever on his purported deep faith in the Russian Orthodox Church and Russian nationalism. These require an appeal to traditional family policies, and gambling is seen as an immortal pastime, at least for the average citizen. The contradictions of the Putin regime might be easy to see from the outside, but in the context of Putin’s Russia, they have a certain logic.