From the world's largest online betting company to the Federation of BiH: Your gambling law is not good

The Executive Director of the Remote Gambling Association (RGA), the world's largest online betting company based in London and Brussels, has warned the federal authorities that the gambling law they plan to adopt in the Federation will not yield the desired results, writes Patria.

Clive Hawkswood said that taxing players upon deposit at betting shops, as well as taxing winnings, will not increase tax revenue in the public budget, as the federal authorities are announcing. Furthermore, such a system, according to Hawkswood, is contrary to the practice applied across Europe.

The Party of Democratic Action (SDA) is trying to adopt the Federal Law on Gambling, which would tax all deposits at betting shops by ten percent, and all winnings at betting shops by ten percent. Therefore, this law envisages taxing players, not gambling operators.

The taxation would apply to all games of chance, except for slot machines. There are slot machines in BiH only in the branches of Lutrija BiH. These machines are not owned by Lutrija BiH; the company rents the machines from the global group Novomatic. For this reason, it is suspected that Novomatic is behind the controversial law in the Federation of BiH.

Domestic gambling operators believe that the law as proposed by the SDA would put them at a disadvantage compared to Novomatic machines, online betting shops, as well as betting shops in Republika Srpska or online betting shops, where deposits and winnings are not taxed.

The Secretary General of the SDA, Amir Zukić, is the strongest advocate for such a Law on Games of Chance. He also has the support of the Alliance for a Better Future (SBB).

The law has been adopted by a majority vote in the Government of the Federation of BiH and the House of Representatives of the Parliament of the Federation of BiH, but it has not yet received support in the House of Peoples.

- We have noted with concern your intentions to impose a ten percent turnover tax on betting, with an additional 10 percent tax on winnings, and we would like to explain the negative consequences of such a law - wrote Hawkswood and continued:

1) Such a law is contrary to the practice applied across Europe, 2) It will make the licensed betting model unsustainable, 3) It will lead to the collection of very little tax, 4) Local consumers will switch to online operators based outside the country who will not be obliged to pay betting tax, 5) If such an approach were adopted in European Union member states, it would constitute a breach of state aid and competition rules.

Hawkswood sent this letter to the Prime Minister of the Federation of BiH, Fadil Novalić, the President of the Federation of BiH, Marinko Čavara, the Speaker of the House of Peoples of the Parliament of the Federation of BiH, Lidija Bradara, the Speaker of the House of Representatives of the Parliament of the Federation of BiH, Edin Mušić, and the Federal Minister of Finance, Jelka Miličević.

- It does not appear that a public debate was held on the proposed tax changes. Had a public debate been held, we would have highlighted the aforementioned points, but I hope you will consider the aforementioned points nonetheless and, as a result, reconsider your decision - Hawkswood's letter states.

- As an industry, we are of course accustomed to betting being a taxable and regulated activity. We are not against it, and our members are licensed in many jurisdictions both within and outside Europe. As such, we have vast, firsthand experience of what is needed for the success of governments, consumers, and the entire industry. The most important part is the adoption of an effective tax regime.

Therefore, we would suggest you look at best practices from other jurisdictions. By doing so, you will see that countries with a gross profit tax are more successful. The few others that have adopted a turnover tax are increasingly in the minority for the simple reason that it does not work in the betting model.

It is estimated that the UK government's profit in 2015-2016 will increase by 500-700 million euros from taxes in the betting sector, solely from online betting operators. A similar amount will also be increased by land-based betting shops. This is a larger market than yours, but it is clear that such a regime can be applied where operators will be successful and will be able to afford to pay significant amounts of tax to their governments.

The solution is a Gross Profit Tax (GPT)

Gross Profit Tax (GPT) directly affects the revenue of gambling operators. It creates market competition at the operator level, allowing freedom of service provision with a wide choice and value without worrying about the margin from special offers. GPT is the best option for the online betting sector, as it has the greatest potential to ensure good value, entertainment, and choice for consumers.

Imposing a turnover tax is contrary to the current trend across Europe, where the United Kingdom, Denmark, Spain, Romania, Bulgaria, and Italy (for some products) have opted for a gross profit tax. GPT is a predictable tax that gambling operators can calculate simply and transparently. The GPT system is also administratively simpler, requires less cost for the state, and lower costs for the operator.

We appreciate the complex challenges governments face in establishing successful regulation and tax systems in the gambling market. However, we hope that what we have said will prompt you to withdraw the plans for taxing deposits and winnings and adopt a gross profit tax - the letter from Hawkswood continues.

He further states that RGA experts will help the Federation get a good gambling law and that the company is making itself available to the authorities in the Federation of BiH, reports Patria.