"Operators Will Be Able to Quickly Enter the Ukrainian Market" – Partner at Eterna Law Artem Kuzmenko
What difficulties can operators face entering the Ukrainian gambling market? Why shouldn’t the government raise taxes on gambling activities? And can the introduction of the gambling business on a legal level become a stimulus for of economic development?
Artem Kuzmenko, lawyer and partner at Eterna Law answered these and other questions in an interview for Ukrainian Gaming Week 2020.
The expert talked about why foreign investors have many questions about the Ukrainian gambling law and explained what difficulties operators may face when starting a gambling business. He specified what measures need to be taken to create a comfortable tax climate in Ukraine, and predicted when casinos will start operating in the country.
Interviewer: Ukrainian Gaming Week (UGW)
Respondent: Artem Kuzmenko (A. К.)
UGW: How would you assess the final version of the law on the legalization of the gambling business in Ukraine?
A. К.: It is important to divide the issue into two parts: the adoption of the law itself and its quality. If we talk about the adoption of the law, then of course for Ukraine this is a very important step. And it's good that it is accepted. If we talk about its quality, then we all know that there is a conflict in the law. Thus, some more changes are needed.
From the point of view of foreign investors, there are already a lot of questions about this document. I am deeply convinced that this does not indicate its poor quality, but rather that we just have a slightly different legal system, which is unusual for foreign investors. Therefore, it is obvious that it will be improved in the process, but now this law is complete enough for the market to launch and start working.
UGW: In your opinion, what amendments does the law need and why?
A. К.: Today, I am sure that the law is enough for the market launch, and that was its main goal. The process of creating a regulator is already under way, gathering professionals and specialists. They and the market itself will have questions from the point of view of the legislation of this regulation, or they will see some gaps in the law and then changes will be made. What’s obvious is that it will be necessary to eliminate the collision in the text. But this law is already fulfilling its main goal.
UGW: Gambling legislation contains conflicting norms concerning the establishment of the Commission for Regulation of Gambling and Lotteries. Will this situation be adjusted and when can this happen?
A. К.: All processes are underway, this issue is being actively discussed at meetings, so that everything will be resolved quickly enough.
UGW: In your opinion, which taxation model for the gambling business could satisfy the interests of both the state and industry representatives?
A. К.: In the world, in general, there are several systems of taxation. There are three main ones. Some are following the path of fixed payments and the absence of any taxes. Some call it royalties, some call it taxes, but their nature is fixed, not interest based. The second model is low royalties and additionally taxes, sales tax. And the third model is when there are only taxes, and licenses are actually issued free of charge. Taking into account the fact that we have already adopted the main law and it contains high royalties, this issue must be approached carefully in order for the market to work. In no case should taxes be overstated. We have the most expensive licenses in the world, which means that the tax model must be balanced so that the Ukrainian market is attractive to operators. You have to be very careful. If we already have high royalties, then taxes should be low.
UGW: What difficulties can operators face when they want to enter the Ukrainian gambling market?
A. К.: Probably, there is no need to talk about difficulties. The main goal of the developed law was a quick launch of the market and a quick economic effect. This means that if there’s normal taxation, operators can quickly enter the market. There will be difficulties associated with the daily operation, because we have a slightly different legislation. Operators have no experience in such conditions. Therefore, there will definitely be questions, but I think issues can be eliminated in the process and the legislation can improve, as it happened in all jurisdictions of other countries after the opening of markets. I hope that operators will be comfortable working on the Ukrainian market.
UGW: Will the law on the regulation of gambling activity become a driver for the development of the country's economy?
A. К.: I believe it will. We have a very successful territorial location. Ukraine is located in the center of Europe. In terms of logistics, we are in a good place so that both Europeans and people from Central Asian countries can come to us and participate in gambling activities, relax and have fun.
There have been several examples of high-quality organization of events in the history of Ukraine: Euro 2012, the Champions League Final, Eurovision. We hosted many tourists who liked to spend time in Ukraine for many reasons.
Legalization can become a similar crucial event. You can expect the same effect as from Eurovision: thousands of tourists will come here constantly and spend time here. The Ukrainian economy will benefit from this in terms of infrastructure, development of air traffic, hotel and restaurant business, attending the museums and other cultural institutions.
UGW: When will we see the first licenses?
A. К.: Licenses are expected to be issued shortly. Some operators have already begun preparations for obtaining licenses. The land-based business, of course, needs time to purchase equipment, search for venues, decorating, so the launch of the casino is slightly delayed. But online businesses will be able to obtain licenses and start operating faster.
UGW: Could the temporary absence of the state online monitoring system become a pretext for offenses by legal operators?
A. К.: There is no need to say that this may be some kind of massive effect. Of course, there may be some violations if we are talking about money laundering, but we have relevant authorities that are obliged to control this, and I think that they will succeed very well. Because today there exist all the tools for combating money laundering.
The main task of the online monitoring system is tax administration. Before its adoption, it is proposed to make threefold royalties, which will in fact become a flat tax that is paid in advance. Therefore, there is no way to evade this. Now all the conditions have been created so that operators can work legally.
It is also worth noting that our tax system has never worked under a special gambling tax that is about to be introduced and it just needs a little time to learn how to work with it.
Ukrainian Gaming Week 2021 exhibition will be held on February 24-25. At the event, companies from all over the world will present modern solutions and equipment for gambling venues.
First day of the event will feature a conference where gambling business professionals will analyze the peculiarities of gambling industry regulation in Ukraine, discuss the regulatory experience of European countries, analyze the key principles of responsible gaming and other topics.