Blogs

Anton Kuchukhidze: So far, the gambling business is implementing the 2022 state budget plan

The war has brought about fundamental changes in the development of almost all economy sectors. It was a real shock for the vast majority of industries, forcing companies to completely review their business strategies. Everyone had to adapt to the realities of war, including the gambling sector.

Today, all Ukrainian economy sectors must adapt to the harsh war conditions. A significant reduction in costs and staff, refusal to develop new business sectors, rising production costs, increasingly complex logistics and many other issues are faced by modern Ukrainian business. The income close to pre-war level is off the table. This, in particular, means not only reduced production and purchasing power of the population, but also the loss of budget revenues due to a decline in tax and other revenues.

In this context, gambling is no exception. It can even be one of those industries that have suffered the most. The demand for entertainment, namely gambling, always plummets during the war. In an unstable context, people spend money on essential products or may even be left without a permanent source of income. However, there are companies that should be credited for paying license fees even in such challenging times. This is more the case for online gambling, but there are also land-based segment representatives paying license fees in wartime.

Now, let us speak with numbers. At the end of 2021, Ukrainian government took a very rational and professional approach to gambling income planning and indicated the state budget revenues from license fees in the amount of more than UAH 1.2 billion. The experience of the past year shows that this estimate is realistic, because in the first four months of 2022, the state budget has already received more than UAH 641.33 million in license fees paid by legal gambling operators.

That is, over a four-month period, the dynamic of budget revenues from license payments is higher than previously projected. That is why it is safe to assume that had it not been for the war, the implementation of the budget revenue plan would have been even faster, and gambling would have generated more revenue than the projected UAH 1.2 billion.

However, today, such income dynamics is primarily provided by companies operating in the online segment. The land-based segment is the most disadvantaged. There is a substantial risk that due to the war, license fees from companies owning land-based casinos and slot machine halls will drop by 80-90%.

Even before the war, their business experienced some challenges and lost profits due to the coronavirus pandemic. Today, due to hostilities, their activities have been completely stopped and the issue of income is off the table. In 2022, we are likely to see only isolated cases of license fees paid by land-based gambling operators.

Today, even taking into account the gravity of the situation, the State is still able to support Ukrainian gambling. After the Russian market became toxic for any civilized business, many Western gambling companies, in particular in the online segment, left the country and are now looking for new ways to strengthen their presence in the markets of Central and Eastern Europe.

This provides additional opportunities for Ukraine, which will be easier to pursue with the adoption of the tax draft law 2713-d regulating the taxation of the gambling industry and promoting more investment in online gambling. This will allow not only to meet the planned UAH 1.2 billion revenue, but also to simplify the operation of the gambling sector in these challenging times of war.

Anton Kuchukhidze, Chairman of the Ukrainian Gambling Council, exclusively for the Ukrainian News
Anton Kuchukhidze