Major shock for Russian online sports betting operators

Would be Russian online sports betting operators are reeling from the shock implications this week of an increase in taxation not ten times higher as previously reported (see our bulletins), but up to 100 times greater.

Reporting on the increase, the Russian business daily RBK claimed that it has seen a draft of the new amendments to the Russian Tax Code, noting:

“Betting shops and totalizers will be obliged to pay 2.5 – 3 million rubles [US$36,600 – $43,900 dollars] per month for the opportunity to take bets online, according to the draft amendments to the Tax Code. This is 100 times more than the current lower tax limit, which [Russian] regions are allowed to levy upon betting shops and totes.”

The fee for each processing centre accepting online bets will be decided by the authorities of the region concerned (there are 12 Russian regions), but if no decision is made the rate will be set automatically at 2.5 million rubles.

Government envisages the implementation of the new tax rates from January 1, 2017, with proceeds from the tax going to the coffers of the regional governments.

RBK says the draft was prepared by the Ministry of Finance on March 21 and approved by the government commission on legislative activities.

Trade bodies representing the bookmakers’ interests appeared to have conflicting views, judging by Russian media reports – First Self-Regulating Organisation of Russian Bookmakers chief Oleg Zhuravsky told the RBK that the new tax should not hinder bookmakers from offering bets online.

“The state will receive good taxes and create an environment which will not throw obstacles in bookmakers’ path and hinder players from receiving their winnings,” he said.

“Bookmakers won’t refuse to work online because of the new tax. Compared with the assets that betting companies have to collect to get a license, a monthly tax of 2.5-3 million rubles looks ridiculous.”

Zhuravsky revealed that there are now 31 licensed betting companies in Russia, whose annual turnover is estimated at $1.5 billion dollars, with returns of around 10 percent.

However, the chairman of the rival Bookmakers Self-Regulatory Organization, Nikolai Oganezov, said rather colourfully that government seems determined to gut the online gambling goose in order to grab all the golden eggs in one swoop, and condemned both the lack of consultation with the industry and little transparency in the development of the tax hike.

Russian operators are already facing a previously decreed five percent levy on income to fund national sporting development.