- June 21, 2016
- Posted by: TSBA
- Category: International Regulation
The following is a speech that was presented by Antony Axisa, former Director of Malta Gaming Authority and Author of the most famous online betting law in Europe.
As strange as it might sound, a gaming jurisdiction and its gaming operators are two materials components of the same marketing effort.
Yet it is apparently wrong for a regulator and by implication for the state, to go into business with operators and worse still to try to compete with them by taxing both their gaming revenue and the winning of their clients. It also sends out the wrong message, to players, if the regulator is perceived as a means to generate more money for state coffers. You cannot run with the hare and hunt with hounds.
As Montenegrin law stands the player is left to rue his ill luck when he loses, but the state helps itself to his money when he happens to win.
The Law that has been enforced has bestowed on gaming operators the questionable distinction of becoming tax collectors given that it is the responsibility of deducting the tax on winnings and passing it on to state coffers.
Once again the United States law comes to our aid. Under US law, it is the player who needs to make the computations, submit them to the IRD and pay the taxes.
The provisions of Montenegrin law in this respect have concocted an administrative nightmare to say the least. Frankly I cannot imagine one good reason why operators should be forced to deploy massively complex back offices and to hire teams of accountants, and in the process incur additional expenses to enforce a legal provision that, unless revised, is putting them out of business.
As an aspiring member of the European Union, Montenegro, its citizens and its businesses must necessarily measure themselves against benchmarks set by the EU and prepared for the challenges that full membership will bring.
It’s gaming industry is no exception and in order to exploit opportunities, Montenegro will have to do its best to ensure that it can compete with other gaming operators established in other EU member states, on a level playing field.
As wrong as this is, it does however show that each member state has been fighting to protect its own patch of turf, to protect its gaming monopolies and also to compel more gaming operators to apply for a license.
It is odd that in the face of this staunch protectionism by other jurisdictions, Montenegro is insisting on applying a law that will drive to distraction potential licensees. A gaming operator cannot be expected to seek a Montenegrin gaming license, when he can target players from elsewhere and offer them a better deal.
There is no gambler on this planet that will happily settle for less, if he is offered more. Keeping in mind that under Montenegrin law it is the operator who has to deduct the tax on winnings and not the player who has to report the winnings and pay tax, it is only logical to assume that the local population will simply stop betting and wagering with Montenegrin licensees.
In a perverse way it will solve the problem – the licensees will no longer need their license, players will not need to pay tax on their winnings and the rate of gaming taxes will no longer matter because, bar some fancy mathematical formulas, whatever you do with zero licenses and zero revenue, will always yield zero license fees, zero gaming tax and zero tax on winnings.
Online gaming industry in Malta represents almost 10 percent (10%) of GDP. The spinoffs to the Maltese economy have been huge – real estate, financial services and employment just to mention a few examples.
Even in the face of adversity, in a situation where the European Commission has field to safe guard the implementation of the freedom of movement of services, the number of gaming licensees in Malta is still on the increase.
I think that there is a lesson to be learned here. Malta has added value to the operators asset by cementing its reputation as being on the forefront to protect players and also as being an ideal jurisdiction where several of the most recognizable gaming brands in the world, feel confident enough to anchor their businesses.
There is no reason why Montenegro cannot be a successful jurisdiction. If it creates the right ecology it is likely to be the jurisdiction of choice for gaming operators who feel a sufficient affinity with the country, to view Montenegro as a stepping stone to other European markets.
How ever an optimal ecology will give some breathing space to gaming operators. Regulations should focus on the adequate protection of players as opposed to the comprehensive taxation of players.
This can hardly be achieved if the collection of taxes becomes the jurisdictions guiding principle.
In contemplating gaming related taxes, Montenegro must decide whether it wants to drive business in the operators direction or else drive operators away.