Committee calls for higher gambling tax rate in Ukraine

A parliamentary committee has argued that Ukraine’s proposed flat tax rate on gambling revenue should be higher to dissuade consumption and fund social projects.

Ukraine.- The Ukrainian parliament’s Scientific and Expert Management Committee has warned that the government’s proposed tax regime for the country’s newly legalised gambling market is unjustified and could lead to a need for government subsidies to make up a funding shortfall.

The tax regime for gambling in Ukraine approved by the Committee on Finance, Tax and Customs Policy in February sets out a flat tax rate of 10 per cent for all gambling verticals.

Other competing bills had previously proposed a range of different rates ranging from 10 per cent to 30 per cent of gross revenue. However, the bill approved was a modified version of Bill 2713-d, which was put forward by committee chair Oleg Marusyak as Ukraine legalised gambling last August.

Under that bill, all gambling verticals could pay 10 per cent of gross revenue, as well as general corporate tax rate of 18 per cent. Customer winnings that surpass more than eight months’ minimum wage – currently UAH48,000 (€1,422) – will be taxed as income.

The amended tax proposal also cancelled a planned tripling of licence fees for the duration of a transition period until the creation of a central monitoring system for gambling.

However, the Verkhovna Rada’s Scientific and Expert Management Committee has argued that there was no justification for reducing the tax burden on gambling licensees. It said that because gambling could have a negative social impact, tax policy should be designed to limit consumption.

It said the government should set a tax rate that would ensure gambling made additional contributions to social projects and that operators would have to raise the cost of products, reducing the accessibility of gambling.

See also: New Ukrainian gambling regulator denies casino licence for Dnipro Hotel.

The committee also argued that setting the tax on winnings at a high rate would minimise returns from legal gambling to the state. 

It also argued against the removal of higher licence fees during the transition period until the creation of the planned central monitoring system. It said the move would result in less funding for economic, social and cultural causes.

It said this would effectively cut budgets at the state and local level, resulting in a need for government subsidies to offset the reduced funding.

The committee also questioned the timing of the implementation of the new tax regime since the original implementation date of April 1 has already passed. It noted that according to Ukraine’s Budget Code, measures that reduce budgets have to be implemented by 15 July of the previous year.