SBC Digital Summit CIS: Ukraine warned of high licensing fees

2020 saw Ukraine launch global gambling’s most ambitious regulatory endeavour, aiming to deliver a comprehensive ‘Gambling Law’ framework governing all industry disciplines for land-based and online gambling verticals by 2021. 

Speaking on the ‘Welcome to Ukraine panel at the SBC Digital Summit CIS, Boris Baum, Deputy Advisor to the Head of the President’s Office, revealed a first-hand account of the early groundwork and research undertaken by the government in its assessment of market factors.

“The first paths were formed by the World Bank recommending that the government reform its gambling legislation, as Ukraine was the last European country to maintain a prohibition of gambling services,” said Baum.

Baum revealed that in 2019 Ukraine’s government had hired experts to undertake an assessment of the black-market, uncovering that the country held over ‘200,000 illegal slot halls and a further 100-150 illegal land-based casinos’.  

He added: “The challenge was in two-parts as we had to form the conditions to legalise a gambling market, whilst simultaneously terminating black-market activities.

“The first approach was to split the laws, forming one for betting and one for lotteries, but that was rejected by the government’s experts who advised the laws must compromise of full gambling activities for land-based and online… This is where the idea started.”

In a short time frame, Ukraine’s government will publish a full breakdown of regulatory requirements for “sports betting, land-based operations, lotteries, online casino and technology providers” – a tough ask for any government.

“Right now we are in a very active phase, shaping the market,” Baum continued. “Last month, we elected the first members of Ukraine’s Gambling Commission. We are finishing draft documents on licensing, and  I believe that the Commission will issue its new licences by the beginning of next year.”

Levgeniia Derbal, Chief Legal Officer of Parimatch, stated that CIS betting group is actively monitoring developments in Ukraine, where the company is eager to launch within its home market as a regulated incumbent.

However, Derbal underlined that Parimatch is currently reviewing all Ukraine conditions and requirements related to “product limitations, technical requirements, KYC, customer protections, anti-fraud, AML and of course taxation”.

Derbal did, however, highlight Ukraine’s licensing costs and draft taxation policies as a prominent concern. “The market will require a balance between the regulations and the taxation, which should be reached ahead of its launch,” she said.

“We have carried out internal assessments in terms of the taxation against other European countries, and we came to the conclusion that the state either has to stick with a high licensing fee or a high tax rate.

“For sports betting the licence fee is about €940,000 per year, and according to the Law once the state monitoring system is implemented the licensing fee will be tripled to €3 million. There needs to be a careful reassessment of high licence fees when tax drafts are reviewed.”

Despite ongoing high licence fees and taxation concerns, Ilya Machavariani, Senior Partner 4H Agency, underlined that the government has taken the correct approach in separating its tax policy away from the Gambling Law.

“For now, Ukraine’s regulations should be considered amongst the best for CIS countries. There is a clear intention by the government to create a transparent market which will welcome international operators.

“This is good for the CIS, as Ukraine will follow Georgia in creating an open approach. At least for now Ukraine’s government  in sending a signal to the international community that the country is welcoming to foreign businesses.”

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SBC Digital Summit CIS (4 – 5 November 2020) is the leading virtual conference and exhibition for the betting and gaming industry in the CIS, Ukraine and Georgia. It features more than 70 expert speakers sharing insights and ideas about the future of markets across the region, with all 18 conference sessions available both live and on-demand.

Delegates can also enjoy a programme of networking roundtables and an interactive product display area showcasing the latest industry innovations. Click here to register for your free pass.

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