Warning letter from Brussels: Proposed Gambling Law will destroy the legal market in FBiH

Nikos Roumnakis, President of the European Organization for Gambling Regulation, sent a letter to the Speaker of the House of Peoples of FBiH, Lidija Bradara, in which he warns the federal authorities that the new Law on Gambling, if adopted, could destroy the legal gambling market in the Federation of BiH. This would mean that several thousand employees in betting shops could lose their jobs, and the federal budget would lose over one hundred million KM in taxes every year, writes Patria.

With the new amendments to the Law on Gambling, the SDA wants to tax all players by 10 percent upon deposit and by 10 percent upon payout of any winnings. This proposed Law on Gambling will be presented to the delegates of the House of Peoples on September 15. The proposal was previously adopted by the House of Representatives of FBiH and before that by the Federal Government.

The taxation of players as proposed by the SDA would apply to all players of games of chance, except for those who play on slot machines.

And there are slot machines only in Lutrija BiH. The actual owner of the slot machines is the Austrian company Novomatic. Lutrija BiH only rents the slot machines. Therefore, the main part of the profit from these machines goes to the owners of the machines, i.e., outside of BiH.

Owners of domestic betting shops claim that the new Law on Gambling would redirect players from domestic betting shops to play on slot machines, and to the grey market, as they would pay lower taxes on winnings there. This would put domestic betting shop owners at a disadvantage compared to slot machines, as well as betting shops on the black market and online betting shops.
Roumnakis expresses a similar opinion in the letter he sent to Bradara.

- If our past and extensive experience is a good indicator, I can state, without any reservation, that imposing a ten percent turnover tax will undermine and worsen the market in this sector in the Federation of Bosnia and Herzegovina as a whole – warned Roumnakis and continued.

- It is clear that this taxation model is not economically favorable for gambling operators. The profit margin in this sector is a maximum of ten percent of turnover. Sometimes it can even be negative. If you impose a ten percent turnover tax, it leaves nothing for gambling operators to cover all other costs (gross wages, offices and rented premises, license maintenance, local taxes, business services, utilities such as electricity, water, internet, etc.).

Legal gambling operators will be forced to offer higher odds (compared to those offered by illegal gambling operators) to their clients in order to cover their losses, thereby losing a significant portion of their sales. As a consequence, a considerable number of legal gambling operators will exit the market, especially those already operating on the margins.

In the end, several thousand jobs in this sector will be lost, and in the end, the Government will collect less tax – warned Roumnakis.

This expert in gambling operations stated that the tax regime planned to be introduced in FBiH does not exist in any other country in the European Union. The last country to abandon this practice was Italy.

- Players are very sensitive to prices and are sophisticated users of technology. Many factors determine how attractive a gambling operator is, but the net payout ratio can be the most important. As a consequence, the proposed tax changes will put pressure on players to stop betting with legal companies and start looking for more attractive betting opportunities online with operators from outside the Federation of Bosnia and Herzegovina. Or even worse, players may switch to illegal operators on the black market within the Federation of Bosnia and Herzegovina.

Research shows that legal gambling operators will lose 30 percent of their clients within the first six months. In the first 12 months, legal gambling operators will lose 65 percent of their turnover.

Therefore, EOGL recommends reconsidering the plans to impose new taxation on gambling operations.

If legal operators withdraw from the market due to excessive taxes, then the market share of illegal gambling operators will increase. In the end, the total tax revenue of the Government will be lower, and illegal operators will dominate the market.

Offer a business model to operators, and in this way, the risk of operators based outside regulated markets entering and filling the market gap, without paying any taxes, can be reduced – Roumnakis wrote in the letter.

He called on the authorities in FBiH to hold a public debate on gambling, and to determine the negative impact of the proposed amendments to the Law on Gambling in FBiH as soon as possible. Roumnakis said that EOGL is at the disposal of the authorities in FBiH to develop an appropriate Law from which the entire society will benefit, writes Patria.