Gaming Companies in Ukraine to Fork Out Higher Taxes on Income
A 18% turnover tax will now be imposed on legitimate online casino operators in Ukraine, as approved by the country's parliament, the Verkhovna Rada. This comes as the government aims to increase income amidst Russia's invasion. Danylo Hetmantsev, head of the Rada Committee on Finance, Tax, and Customs Policy, announced the development on Telegram, mentioning that operators will have to pay the tax based on their gross gaming revenue instead of their gross earnings.
The tax is expected to bring in an additional UAH1.5 billion (US$40.62 million) to the Ukrainian budget each year, adding to the UAH3 billion (US$81.2 million) generated from the gaming industry in the first half of 2022. Gaming tax revenues were 14 times higher compared to the same period in 2021.
The tax was sneaked into broader legislation on maritime safety instead of being introduced as a separate bill. Despite its indirect introduction, the measure received enough support to pass, with 266 of the Rada's 450 deputies voting in favor during the second reading. The new tax is part of an ongoing effort to improve tax collection in Ukraine.
As of August 1, the government partially lifted a moratorium on taxes for several industries, including those related to alcohol, tobacco, fuel, gambling, and financial services. Starting in October, authorities will begin more strictly monitoring these industries, aiming to crack down on potential violations.
According to a government study, the legalized gambling market in Ukraine had been evading tax payments, and several operators were colluding with banks to conceal their operations. The total turnover of the gambling market, estimated at UAH180 billion (US$4.87 billion) annually, saw only 1.2% paid in tax. Unsurprisingly, 95% of all gaming business operators failed to pay taxes.
Operators avoided taxation through miscoding, wherebank transactions were labeled as payments for various products and services instead of gambling. Some banks also facilitated the process, sending funds under different codes or as regular card-to-card transfers.
Although the study didn't specify the operators involved, nine banks participated in the scheme at least once, with six engaging in systematic miscoding. IBOX, one of the banks, gained around UAH2.5 billion (US$67.7 million) from its involvement in the illegal scheme annually.
Even the National Bank of Ukraine is alleged to have been involved, leading to the dismissal of two of its leaders. The bank either knowingly allowed operators to conceal their activities or was unaware that some were based in Russia and operating in violation of a presidential ban.
The return of the gaming tax is an attempt to mitigate the losses from the scheme, but its effectiveness hinges on cooperation from the banks. If they refuse to cooperate, Ukraine may not receive the additional funds it is anticipating.
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Source: www.casino.org
