Gambling business's key "tax irregularity" identified by Zheleznyak
In the stunning world of Ukraine's online gambling scene, Yaraslav Zheleznyak, deputy head of the parliamentary financial committee, has sparked a heated debate with his claims of tax evasion within the industry. Taking to his beloved Telegram channel, he shared a series of enlightening charts for all to see.
Joined by Yuriy Gayday from the Center for Economic Strategy, Zheleznyak analyzed the data from the 11 legal online casinos operating in 2023, and the 14 that joined the fray in 2024. These powerhouses account for a whopping 97.6% of the taxes the industry has paid in the first half of 2024.
Their calculations revealed an average tax burden of 11.4% on the total stakes for the last quarter, which, according to the onto-it Zheleznyak, is simply not enough.
He points to "two anomalies". The three-month average ratio of paid tax on income to total stakes minus payouts (Gross Gaming Revenue) is an astounding 31.6%, significantly higher than expected.
However, the chart paints a less rosy picture when it comes to the ratio of NDFP to win payouts. "In theory, this indicator should approach 18%, as defined in the Ukrainian Tax Code and further specified in the Tax Service's clarification," Zheleznyak claims. But the data shows otherwise, with the indicator hovering around the measly 4% mark.
The question is, why the discrepancy? Zheleznyak suggests that it's the NDFP from winnings that's causing the biggest tax loss.
The tax burden for the Top 8 market players, excluding those with temporarily blocked accounts, paints a telling picture. Some are paying close to 21%, while others are shamelessly managing with a paltry 4%. "This, my friends, is tax evasion!" Zheleznyak complains, shaking his head in disbelief.
It's worth mentioning that Zheleznyak has announced a meeting of the Verkhovna Rada Committee to delve deep into "one of the most interesting schemes" in the gambling business and other sectors.
The intricate web of the gambling industry in Ukraine is riddled with complexity. Online operators often cloak both legal and illicit activities, taking advantage of jurisdictions like Malta or Curacao. Enforcing regulations and tracking cross-border transactions remains a resource-intensive task.
Gambling-related tax evasion is a heavy burden for Ukraine, with cases like the β΄6 million tax evasion scheme by a gambling-linked company and allegations against entities like VBet. The authorities are stepping up their game, seizing funds like the $19 million taken from an iGaming firm, and cracking down on offshore platforms.
Regulation in the realm of virtual assets, such as crypto casinos and gaming platforms, is another challenge. Ukraine faces problems with illicit financial flows linked to gambling, as these platforms are used to launder funds. The authorities are working on implementing more advanced AML tech to target these operations.
The Non-Deductible Fixed Percentage (NDFP) concept seems to be a mystery that's yet to be brought to light. More precise details on NDFP will likely emerge from a deeper examination of Ukraineβs tax code amendments or parliamentary drafts.
- Deputy head of the parliamentary financial committee, Yaraslav Zheleznyak, along with Yuriy Gayday from the Center for Economic Strategy, performed calculations on the taxes paid by online casinos operating in Ukraine in 2023 and 2024.
- They analyzed data from the 11 legal online casinos in 2023 and the 14 that joined in 2024, revealing a tax burden of 11.4% on the total stakes for the last quarter.
- Zheleznyak argues that this tax burden is inadequate, pointing to two anomalies in the calculations - the ratio of paid tax on income to total stakes minus payouts, and the ratio of NDFP to win payouts.
- The former ratio is significantly higher than expected at 31.6%, while the latter hovers around 4%, much lower than the 18% defined in the Ukrainian Tax Code.
- Zheleznyak suggests that the NDFP from winnings is causing the biggest tax loss, with some of the top market players paying close to 21% tax, while others evade taxes with a paltry 4%.
- In light of these findings, Zheleznyak has announced a meeting of the Verkhovna Rada Committee to investigate gambling-related tax evasion and other illicit activities in the industry.
