Tetiana Tyshchenko's interview on topical issues of launching the gambling market in Ukraine
Author: Tetiana Tyshchenko
Source: gamingpost.net, 12 March 2021

Experts say that the certification of equipment will become available if either a transition period is adopted or the Comission gives green light to certification under the old national standarts (DSTUs) that existed before the gambling ban. How do you think, which of the options is better from a perspective of quick launch of the gambling market in Ukraine?

The matter of certification constitutes the key and, perhaps, the most problematic aspect of launching the gambling market, as no gambling business is, in fact, able to entirely enjoy its licence without certified equipment, in accordance with Ukrainian law.

The abovementioned options for solving the certification problem cannot be called completely effective or perfect.

A transition period could be a good solution, as it would allow time for finalising all implementing legislation governing the requirements applicable to gambling equipment and its certification. We should, however, understand that the legalisation of use of non-certified equipment for the transition period is only possible by amending the Gambling Act (other options are likely to contradict the provisions of applicable law that prohibit the use of non-certified equipment).

The question is whether the Parliament will succeed in securing the necessary majority vote to implement this option and how soon all the necessary procedures can be completed to have the amendments approved.

When it comes to the application of the existing national standards, a problematic issue is that they cannot fully apply to gambling equipment inasmuch as all the existing national standards are not special standards and fail to recognise any aspects of gambling machines.

The certification process under the existing national standards raises certain questions among our foreign clients too, as they rely on other international standards in their activities and, accordingly, will have to significantly amend their policies, procedures and operational standards to obtain certificates under the proposed national standards. This, in turn, creates additional barriers for foreign operators to enter the Ukrainian market. The equipment will therefore be considered formally unsuitable for use in Ukraine even in the case of availability and use of equipment certified under international standards.  

The best thing would be to recognise the international standards and certificates issued thereunder. This will allow the use of equipment certified abroad without unnecessary additional approvals. This, however, does not replace the need for parallel work on the above options, as the legalisation of the international standards is a long process.

The Verkhovna Rada has not got arounf to voting on Bill No. 2713д amendind the Tax Code. How could this complicate the operation of the gambling market? How do you think, which legislation will better regulate the tax situation - the new one, levelling al GGR rates for all types of business at 10% and abolishing triple license fees, or the existing one, providing for diffenent tax rates on the one hand and tax deferrals and triple licence fees on the other?

The double taxation system, under which operators are required to pay high rates of GGR (gross gambling revenue tax) and income tax, poses a serious problem, as it puts a heavy tax burden on participants of the market at the beginning of its development. The obligation to pay the triple licence fees until the launch of the online monitoring system additionally reduces, to a significant extent, the investment attractiveness of our market.

Although they have their individual strengths and weaknesses, both of the amendment options are therefore welcome. For example, tax and licence fee deferrals are likely to enjoy a widespread support among gambling businesses, as this represents a fairly significant tax benefit. This, however, raises an issue for the interests of the government and local governments in so far as budget revenues are concerned.

We must realise that we and more progressive countries, in fact, compete for investors, in one way or another. Accordingly, the more favourable Ukraine’s business environment is compared to other countries, the more interest our market will attract from global gambling leaders. The option suggesting the introduction of a single tax rate for all will be more correct from a perspective of balancing the interests of the government and those of gambling businesses.

What are the difficulties that you have observed at the lauch of the gambling market?

The difficulties mainly relate to the development of a regulatory framework (again, in respect of certification) and the creation of an appropriate related infrastructure. This includes a lack of specialists with appropriate background, who would be able to certify the equipment (the training of such specialists also takes a lot of time), and the long-lasting process of creating the national online monitoring system—a basic tool for the Commission to exercise control over the market. The absence of the above materially complicates the launch of the market.

In addition, there are also problems associated with the hosting of operators’ servers to process information regarding all gambling transactions received by online systems. The fact is that under applicable law such equipment must be located in Ukraine, which raises additional difficulties and even certain risks for many non-residents (this problem must also be addressed by removing the restriction on hosting servers in other jurisdictions).

Four online casino licenses have already been issued. But the online monitoring system has not been seen yet. How can one track the payment of taxes by operators, for instance?

I do not think that this will pose big problems inasmuch as the transitional provisions of the Act contain rules that require that gambling operators maintain, using their certified online systems, all records of guests, their bets for each game, all gains and losses, and exchanges of gambling currencies into real currencies subject to further disbursements, regardless of whether the national online monitoring system has been put into operation.

Such data must be stored until the national online monitoring system is put into operation and be further transferred in its entirety via communication channels within ten days thereafter. Failure to comply with this obligation may lead to a revocation of an expensive licence.

Where necessary, the information about all transactions so obtained can additionally be verified, as it is overwhelmingly likely that the impossibility of amending collected data will be one of the critical certification requirements of the online system.

In addition, do not forget that the tax service will continue to check if gambling businesses comply with their tax obligations, which additionally guarantees the payment of taxes.

It is another matter that the Gambling and Lottery Commission will, in fact, be unable to entirely perform its functions without the national online monitoring system created and put into operation. For the time being, the absence of the system adversely affects not only gambling businesses but also the Commission.

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