Ukrainian Finance Minister Proposes Land-Based Casinos, Online Gaming
The Ukrainian Ministry of Finance, which is searching for new sources of revenue after losing an entire province through war, proposed legislation to regulate land-based casinos, sportsbooks, and online gambling throughout the country.
Gambling was banned in Ukraine in 2009, but the country has seen a rise in illegal gambling since the imposition. Eastern Europe’s organized crime appears to have opened brick-and-mortar gaming establishments, while illegal operators have launched gaming portals. The result of the ban is a loss of tax revenues, with little decline in gambling habits.
Consultations with Business Leaders
The new draft legislation was written after consultations between business and political leaders. Over the past months, a number of conferences and seminars have been held to discuss the wording of new gambling laws. Several regional companies were asked to consult on the new bill.
Storm International on the Proposals
One of those was Storm International, the Eastern European gaming company responsible for brands like Storm Casinos, X.O. Club, and Shangri La. Back in October 2015, Darren Keane, the current CEO of Storm International, said his company would invest in Ukraine if the proper laws were enacted.
Darren Keane has lauded the new bill put forward by the Finance Ministry, though he has pointed out aspects of the proposed new law which needs improving. Keane said the taxes and fees on the brick-and-mortar casino industry were reasonable and well-considered. He said anyone operator who could not meet the reasonable tax rate should not be in business.
In elaborating on that notion, Darren Keane said, “The proposed yearly license fee is a fair price that should be paid yearly in the local currency. Failure to do so should mean immediate closure. The proposed annual table and slot taxes are acceptable numbers and are in line with neighboring countries tax codes. These should be paid on a monthly or quarterly basis to give the operator the flexibility of adding or removing equipment.”
Issues with Hotel Regulations
One key improvement would be less restrictions on the hotel sector of Ukraine. At present, Keane says Ukraine has too few 4-star and 5-star hotels. Also, the hotels available usually have less than 200 rooms. Restrictions need to be lifted to build the kind of hotel-resorts international high rollers want for their lodgings.
He said that limiting the number of hotels would limit the number of gambling positions available at a casino. Doing so would affect the bottom line for operators, while restricting the tax revenues Ukraine’s government could collect. The law has an employee minimum of 250 workers per venue, and the restrictions likely would make it hard for a casino to meet the minimal requirements.
Online Gambling Tax Too High
Keane said the tax rate on online casinos is too high, and predicted such a rate would limit foreign investment. In doing so, he compared Ukraine’s tax rate to the tax rates of nearby gaming havens, Georgia and Armenia.
He added that Ukraine needs to be competitive, if it wants to jump-start its Internet gaming industry after six years of inactivity. The Storm International CEO said, “When you compare it to both Armenia and Georgia, two developed gaming markets, the 1.5 million Euro proposed in Ukraine dwarfs them by a 7 to 1 ratio. It does seem too high a price to pay to enter that market.”
Despite that, Storm International released a statement earlier this month supporting the legislation. The statement read, “In general, Storm International welcomes this new law as it will bring the legality back to gaming in the Ukraine and hopefully put a stop to the criminal elements that operate the illegal casinos at present.”
Keane’s opinions are likely to be shared by many in his gaming industry. The European gaming companies are adopting a wait-and-see approach to the legislation, but certain would like a return to a time when gambling was unfettered in the country.
For most of the time since 2009, Ukraine’s government has been pro-Russian, meaning it shared Vladimir Putin’s backwards thinking on subjects like gambling. Putin views casino gambling through the lens of his Russian Orthodoxy, or at least the cynical politician who has given billions of dollars in favors to his cronies claims to view gambling as a moral issue. While the Orange Revolution government of former Prime Minister Yulia Tymoshenko banned casinos, the government of Putin crony Mykola Azarov tightened restrictions these past few years. With the annexation of Crimea by the Russian Federation and the invasion of Eastern Ukraine, the country is in need of new revenues. Casino gambling is a way to collect taxes without further taxing the Ukrainian population.