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April 21, 2017

Czech Gaming Regulations Too Restrictive?

Only a few weeks ago, Prague Post published an article regarding the iGaming industry and its progress so far, given the introduction of new Czech gambling regulations only this January (even though the bill was passed in 2016).

The article discussed the fact that gaming software powerhouse Playtech signed a deal to bring their extensive range of slot games, table games and more to the Czech Republic for the very first time. Playtech-powered Fortuna Entertainment Group even launched their first online casino last March. At the time, this was a sign that the economy as related to the iGaming industry was pushing forward. Indeed, the Finance Minister estimated in April of 2016 that when the bill would finally pass and be enforced, the Czech Republic would see an increase in revenue of over 1.5 billion crowns. Since then not much has changed that would draw unwanted speculation.

However, there have been issues boiling under the surface that has developed since the last article published regarding the matter. Playtech could only break into the Czech market due to the new Czech gambling regulations put in place recently. These regulations, aside from mandating the licensing of both games and online casinos, also significantly raised taxes. In particular, it seems to be those slot machine operators took the hardest hit. Slot taxation rose steeply from a 28% rate to a 35% rate. This while other prominent areas of iGaming such as sports betting, lottery betting, and poker have retained their comparatively low 23% rate. Also, the Ministry of Finance has been cracking down on casino operators who are looking for a way to keep their websites online even while undergoing the license application process, after pressure from Transparency International (TI).

While these might seem like necessary measures to ensure that gambling addiction does not become a national problem, strict legislation has a track record of being widely unpopular with online casinos. As this article about Polish gambling regulations points out, Poland has recently suffered significant losses due to its rigid gambling laws. Major names in the gaming industry have opted to leave the Polish market due to reasons like a 12% taxation on turnover rates, and the totalizing control bestowed on certain state-owned companies. The Czech government and the Ministry of Finance are by no means following in the footsteps of the Polish state, as the article seems to suggest; however, the latest complaints brought up by gambling companies regarding Czech gambling regulations are not to be ignored.

Royal Panda as an example of what is to come. Royal Panda is an online casino which in recent news has decided to exit the Czech local market after the Czech gambling regulations have been updated and taxation increased, much in line with what happened in Poland with some gaming companies.

Although gambling is a real threat for some people, it is also key to keep in mind that the iGaming industry is an extremely lucrative and sizeable opportunity for the Czech economy to take advantage. Gambling tax havens like Malta seemed to have recognized this and exploited the situation, while still maintain a favorable environment for companies. Today, Malta’s economy, small as it is in comparison to the Czech economy, benefits greatly from the number of gambling businesses that have set up shop on the small island even though it has relatively lax taxation rates.

While the iGaming market in the Czech Republic seems to be steadily growing towards that 1.5 billion crown revenue increase, it does not bode well that the government has recently decided to start tightening restrictions on licenses and upping tax rates resulting in online casinos like Royal Panda leaving the market. The government should take Poland as a warning to curb their enthusiasm when it comes to exploiting the gambling industry. In the long-run, it would serve both entities far better.

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