A parliamentary committee has warned that the proposed flat tax on gambling revenue in the Ukraine could hit state and local budgets, and necessitate government subsidies to make up the shortfall.
The latest tax proposal, first put forward in February this year, standardises tax rates at 10% of gross revenue for all verticals, as opposed to the original plans for a rate ranging from 10% to 30% of gross revenue.
This also sets a tax on winnings over eight times the annual minimum wage in the country, or UAH48,000 (£1,223/€1,429/$1,745).
The amended tax proposal also cancels a planned hike in licence fees that would have applied until the country established a central monitoring system for gambling. This would have trebled the fees due for betting, online casino and slots licensees before this date.
However the Scientific and Expert Management Committee of the Verkhovna Rada argued that there was insufficient justification for reducing the tax burden on licensees. It said that gambling could have a negative social impact, and that tax policy should therefore be designed to limit consumption through higher duties.
It should be set at a rate that ensures licensees make additional contributions to social projects, and which require the operator to raise the cost of its services to reduce the availability of gambling, the analysis states.
The committee also claimed that by setting the tax on winnings at a particularly high rate, it could minimise returns from legal gambling to the state.
Furthermore, the removal of higher fees during a ‘transition period’ until the central monitoring system was in place would mean there was less funding for economic, social and cultural causes, it added.
By reducing the funding available at state and local level, the committee claimed budgets would effectively be cut. Under Article 103 of the country’s Criminal Code, it noted, tax benefits that impact local budgets must be offset by government subsidies – something which it said there was currently no provision for in the tax proposal.
Finally, it raised the issue of when these new taxes could be applied. The legislation was due to come into force from 1 April, meaning the implementation date already needed updating. However, the committee noted that taxes and fees cannot be changed during a budget year. According to the Budget Code of Ukraine, measures that reduce budgets must be implemented by 15 July, of the year before they are to be introduced.
The Committee has advised that the Rada address the concerns raised in its analysis.
