Czech Government Increases Online Gambling Tax

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The Czech Republic government is rarely in the news in matters concerning European online gambling. The countries that usually take up the limelight are Germany, France, Italy and Spain. However, this week one of the leading Czech Republic online gambling operators issued a stern warning that if the government continued raising both retail and online gambling taxes then it would trigger an exodus to more tax-friendly climes.

In January 2012 the Czech government had increased gambling taxes once again. They had justified this as being essential for the country to comply with European Union rules that required the Czech fiscal deficit to be no more than 3% of gross domestic product. As a result online gambling operators had to pay a 20% tax on gross wins in addition to a corporate income tax of 19%. The taxation is huge when compared with similar neighboring countries. The tax rate is nearly double that of 12% in Poland and almost four times that of 5.5% in Slovakia.

These high rates of online gambling taxation have had a seriously adverse effect on the Fortuna Entertainment group, which is the largest gambling operator in Central Europe. This has led to officers of the company lashing out against the high rates of taxation. Michal Veprek, CFO, said that his company had paid over €4 million in taxes in the first half of 2012. This had placed them at a competitive disadvantage with foreign rivals in the Czech market who paid no tax. The Chairman Wilf Walsh pointed out that although Fortuna posted a 15% annual increase in gross wins and a 10% annual increase in revenue from bets and lottery, the net profit fell 35% due to gambling tax.

Walsh said that Fortuna would prefer to operate from within the Czech Republic, but circumstances had compelled them prepare back up plans. Fortuna has established a Malta operation and is ready to switch to an offshore registration. If the situation does not improve by the next Annual General Meeting of shareholders the company will move to Malta. This would lead to a lower tax bill and protect shareholder value while increasing the dividend payout. Veprek also stated that Fortuna also has a shell company in Hungary as an offshore platform closer to home to go to.

That increase in taxes leads to declining sales has already been established with respect to diesel. Czech residents have started buying cheaper fuel in neighboring countries. Economists have also warned that the tax increases are likely to prove counter-productive. But the Czech government is not paying any heed and more tax increases are on the cards.

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