Wednesday, 11 October 2023

By Lawyer Prof. Dr. Marius PANTEA

Drastic measures solve nothing…

This article is meant to be the opinion of someone who has been in the position of a regulator and is now in the private sector of the Romanian gambling industry. Without claiming to be the holder of miraculous solutions, we are trying to get an idea of what the industry wants in the coming period.

Gambling is just a fun activity not a “social problem”

If we take into account the proposed regulation that has just been approved in the Romanian Senate, we believe that is a personal ambition or it was driven by the need to gather as many votes as possible for next year, by a so-called solution to a social problem (the exclusion of gambling from Romanian society), This is the elimination of some services in the cities and their expulsion to the outskirts of the cities, as well as their limitation (depending on the number of inhabitants), but also giving the mayors of the largest cities the right to authorize such activities (depending on how much and how each gambling operator will contribute to the electoral campaign or to the “welfare of the community”). This solution to a social issue lacks evidence, budgetary impact studies, and statistics certifying a high rate of addiction. In addition, it does not consider the negative opinion of the Romanian Government and fails to provide a practical solution for limiting gambling participation. Furthermore, no alternative budgetary sources have been identified to replace the over 1 billion euros in revenue per year. If traditional gambling venues disappear, what will happen next? Maybe Romanians with many mobile phones will switch to remote ones. Those who signed and voted for this regulation didn’t consider this aspect.

The arguments put forward by the political class are astonishing, including: there is no truth to the claim that there are no slot machines in the EU. We suggest examining how slot machines operate in Spain, Italy, and other European nations. You will observe that these machines are present in most bars, restaurants, and clubs and are much more abundant than in our country. Additionally, the exploitation regulations are much less strict than ours. Elected representatives should educate the public about the entertainment services offered by the gaming industry. Programs should demonstrate to young people that gaming is enjoyable, but not a means for instant wealth without effort. Perhaps a national program to prevent addictions, such as gambling or drug use, could be funded through the well-known PNNR funds as a future solution. Education is essential for a civilized society that is aware of its risks and can make informed choices.

Repeatedly overcharging the gambling industry is not a solution

Meanwhile, there is a plan to revise GEO 77/2009 by enhancing taxes yet again in the field (remember that taxes were increased in August 2022). The proposal appears to aim at resolving the “social problem identified by the senators.” However, the suggested “solution” is unrealistic because:

  1. It proposes the elimination of limited-risk gambling – a type of gambling that was introduced in 2015, and which is a concrete way to limit addiction by offering low-level prizes. We fail to identify why this type of game is to be excluded from licensing. From reading the background note, I have not identified any reason that would require such a legislative measure. On the one hand, gambling is to be restricted on the grounds of addiction, and on the other hand, those gambling devices are excluded from authorization which, by their design and operation, automatically limit the possibility of developing a gambling addiction.
  2. It suggests removing temporary gambling from the law as it was added after studies conducted by the Tourism Ministry to attract more foreign tourists to our country. It appears that we don’t require funds from international visitors who seek varied entertainment options. According to tourism data, the leading requirement is the incorporation of gambling. The background note does not show any issues requiring this action as per ONJN’s statistics that don’t suggest any problem with this game type.
  3. It suggests adding large amounts of money outside the budget to ONJN’s efforts to prevent addiction. Currently, the Office has significant funds available, but none have been used for prevention programs. The funds have only been allocated to staff salaries, and no projects have been initiated for this purpose. The same background note does not include a plan at the national, regional, or local level, nor does it specify how the money already collected or that will be collected from the suggested modifications will be utilized.
  4. Proposes to increase permitting and licensing fees – the second time in just two years. We accept that the gambling industry is a state monopoly and that the taxation of this activity is the exclusive attribute of the budget, but the annual change in fees, which has become an annual concern, will not have the desired effect, because gambling operators cannot operate to the extent that, in the interval of a 10-year license, the taxes have so far changed 3 times, Thus, the predictability of the business has disappeared, they have gone through the pandemic period (where they paid licence and permit fees for almost 2 years without operating) and now, in the midst of a global economic crisis (fueled by general price increases and the war in Ukraine), they have to pay large additional amounts (new license and permit fees) in order to operate.
  5. Proposes the exclusion of partnerships between gambling operators and other companies – as there are tax regulations that establish that partners of gambling operators become liable for corporate tax (16%), they cannot be micro-enterprises (with 1% or 3% tax). The famous Notice already does not argue for this change either. The previous provision eliminates the possibility for those who collaborate with licensed operators to earn money from the operation of gambling, which, through tax optimization to evade the maximum tax regime, and the ban introduced will not bring any amount to the state budget, on the contrary, will disappear income from this joint exploitation activity.
  6. Proposes the introduction of guarantees of 1, 2, 3 – 5 million, depending on the category of games operated – amounts to be deposited by the operators as cash collateral with the Treasury at the disposal of the ANAF and which can be enforced in the event of non-payment of licensing and authorization fees – guarantees which are burdensome for operators (for small operators they are practically impossible to deposit) and which are in some cases very high (e. g. for operators with 100 slot machines) and in other cases do not cover the fees (for an operator with over 2,000 slot machines – the guarantee does not cover the fees for one month). The measure is generating major imbalances in the cash flow of any company, and in the current context, gambling operators, in addition to the considerable decrease in revenue from the operation of gambling, will face the problem of identifying the million euros they must deposit with the Treasury (in addition to the current payments). This measure will certainly lead to the closure of many gambling businesses and the state budget will receive much less money than at present.
  7. The proposed increase in administrative fees – the €10,500 gambling license issuance fee – is the most expensive paper issued by a state authority at EU level. As far as the other Administrative Fees are concerned (license documentation analysis fee: 3,500 dollars for online and 600 dollars for land-based authorization, as well as 250 dollars for analyzing the documentation needed to request gambling authorization and another 250 dollars for analyzing the documentation needed for certifying new games or integrating them into an authorized remote gambling platform), these are considerable amounts that operators have to pay to the Office, which has employees paid for this activity.

Drastic measures solve nothing…

The goal is to generate extra income for the state budget by restricting or shutting down conventional gambling. However, these measures were not discussed with the industry and are imposed by individuals unfamiliar with the workings of this sector. They are simply written on paper and likely approved by the ONJN.

By implementing these regulations, we will actually achieve the opposite outcome from what the proposal’s introduction claims. This is because it will facilitate tax evasion and the illicit use of gambling resources. Prevention activity is a more economical approach, and immediate results in state budget revenues will be seen from these proposed changes. Regulations that operators voluntarily follow prevent fraud and help manage the gambling business better than imposing expensive fees and safeguards that force operators to resort to the black or grey markets. Those who have made investments in this field and will not be able to move on, will not leave the industry empty-handed, they will try anything to at least recover the investments made, and the Control Office will not be able to keep up with the large number of gambling means that will be operated illegally.


Author: Editor

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