In the draft of the fiscal strategy and through the proposed amendments to the law on personal income tax, the government has foreseen the introduction of a tax on winnings from games of chance of 15 percent, with the intention that the state budget will receive five million euros annually from this tax.
The group of organizers of games of chance at the Chamber of Commerce has submitted comments on this proposal to the Ministry of Finance, in which they state that comparative practice shows that the introduction of this tax will affect the drop in payments by legal organizers of games of chance by up to 30 percent, and thus the reduction of state income. of the budget from the variable fee on games of chance, which is why they suggest that this proposal should be abandoned.
The state now earns about 22 million euros annually from gaming concessions, and that amount is constantly growing.
The proposal from 2014 failed miserably
The introduction of this tax at the same percentage and in the same way was adopted by the Parliament of Montenegro in December 2014 at the proposal of a group of DPS deputies, and it was supposed to be applied from January 1, 2015. However, the Ministry of Finance at that time did not make by-laws that would define the method of calculating this tax, with the so-called explanation.
Since there were no such by-laws, the organizers of games of chance in 2015 did not deduct this tax from their players who had winnings. In December 2015, the Assembly adopted an amendment to the law which removes the tax on winnings from games of chance. During the debate at the time on whether this law could be implemented, a petition with 18 citizen signatures against this tax was submitted to the Parliament, which is one of the most numerous petitions organized so far.
Now nine years after that failed attempt, the new government is trying to introduce the tax in the same way. The basis of tax calculation would be all profits, i.e. the difference between payment and payment. The amount of tax would be calculated and collected by the organizers of the games of chance themselves, that is, subtracted from the winnings achieved by their players.
"The tax on income from games of chance is calculated and suspended by the organizer of games of chance upon each payment of the winnings and paid at the latest on the next working day from the day of payment", it was stated in the draft law on income tax of natural persons, which was on public debate until August 8.
This tax is one of many that the Government plans to introduce in order to compensate for the loss of around 280 million euros, which it will have due to the planned reduction of contributions to the pension insurance.
Players will go to foreign sites
The group of organizers of games of chance believes that this proposal should be abandoned because a significant part of the income will go to the black market and foreign Internet organizers, where the players' profit will not be reduced due to this tax.
"The proposal is to abandon this solution because earlier attempts to implement this solution and international practice have shown that this measure has a negative effect on the total revenues from games of chance, which are very important for the state because it leads to a significant decrease in state revenues on that basis, in question is the category of variable concession fee. The introduction of the measure of taxation of winnings has an effect on the decrease of payment by legal organizers in the amount of about 30%, which has negative repercussions on the income that the state receives from the variable concession fee, as the most important income from games of chance. Therefore, the introduction of the measure of taxation of winnings from games of chance is contrary to the proclaimed goals in the Fiscal Strategy", stated in the remarks of this group of the Chamber of Commerce.
They expect that the introduction of this tax will generate fiscal evasion and a gray economy, and this is because players will invest their money on foreign sites and those operators who do not have the obligation to pay tax on winnings.
The state loses on the variable concession
This Group states that the organizers already pay a variable concession fee of 10 or 15 percent, depending on the type of game, on the difference between player payments and payouts of winnings, and that the introduction of a tax on winnings to players would reduce that difference, that is, the state would receive less revenue from that fees.
"Given that the variable concession fee is calculated as the difference between payment and payment, the reduction of the category of payment and games of chance will cause significant negative effects on the category of variable concession fee and a significant decrease in state revenues can be expected on this basis (which were growing in the previous period and which are expected to continue to grow with the introduction of new online surveillance). Therefore, there are realistic projections that the introduction of this measure will reduce the total revenues of the state, which are generated from the activities of games of chance. The introduction of a profit taxation measure would have much greater negative effects on the state's concessional income than the positive effects of the increase in income based on personal income tax", according to the organizers.
Disputed difference between payment and payment
From this PKCG Group, they also have objections to the technique of applying the proposed solutions, as well as the fact that there is a collision between the proposed Law on Personal Income Tax and the current Law on Games of Chance.
"There is an important substantive difference between the category of income and winnings in games of chance. It is the legislator's obligation to clearly define the taxed category, the tax base and the tax rate when introducing fiscal measures. In this regard, it is necessary for the legislator to define the category: winnings, that is, previously, what is considered the total stake in games of chance. Also, the time allocation of the cost/stake and the corresponding category of profit has a very significant effect on the regulation of this new duty", it was stated in the comments.
They state that in different forms of games of chance - casinos, slot machines, bookmakers, lottery games - the stake is treated differently and it often happens that the player, during the game, directs the money won on one game to another game or to another game.
"Therefore, a big technical problem arises, how to calculate the total amount of invested funds. In games of chance, the conceptual category of winnings is linked to the event, while the Personal Income Tax Act clearly defines that the basis for taxation is the taxable income that the taxpayer realizes in the tax period, less the amount of the loss carried forward. The tax period for which income tax is calculated is the calendar year. The impossibility of adequate calculation occurs due to the lack of a clear definition of what is considered a stake and for which period the tax on realized profits is calculated (temporary allocation of costs/stakes)", according to this PKCG Group.
Different practices in neighboring countries and the EU
In Croatia and the entity of the Federation of Bosnia and Herzegovina, there has been a tax on part of the winnings in games of chance for ten years, while the smallest winnings in Croatia under EUR 100 and in the Federation under 100 marks (EUR 50,5) are exempt from taxation.
After its introduction, the organizers announced that it brought them a drop in traffic, and thus a drop in income for the state.
In the Federation of BiH, there is a tax of 10 percent of all winnings in games of chance and prize games whose value is over 100 marks. In the other entity of Republika Srpska, this tax does not exist, so organizers from the Federation complain that part of their players went to internet organizers in RS.
Also, it was discovered in a loophole in the Federal Law, because around a player, for example, who has a possible win of over 100 marks, the organizer does his player a favor and instead of one ticket, divides the payment into several tickets in which the possible win is below 100 euros. For example, if the possible winnings are 180 marks, the organizer prints two tickets for 90 marks each.
In Croatia, winnings tax is charged on lottery and betting games, while there is no tax on winnings in casinos and slot clubs, and the rates depend on the amount of winnings and amount to 10, 15, 20 and 30 percent.
In the case of lottery games, the tax rate is 99,54 percent for amounts from 1.327 to 10 euros, and then gradually increases, so the tax rate is 66.361 percent for amounts of winnings over 30 euros.
In the case of betting games, no tax is paid on winnings below 1.327 euros, and above that the rates are from 10 to 30 percent, depending on the amount.
In Croatia, the tax authorities also complain about the practice of the organizers of betting games issuing multiple tickets with smaller tax-free amounts to players whose winnings are over 1.327 euros.
There is no standard practice of taxing games of chance in the EU countries, but member states are given the freedom to regulate this area themselves. Some countries tax organizers at higher rates, not player winnings, while others have higher rates on winnings.
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