EXPERT OPINION ON THE LEGISLATIVE INITIATIVE OF THE AMENDMENT TO THE GAMBLING TAX ACT

Prague, March 27, 2023

Prague, March 27, 2023 - When determining the amount of taxation for individual types of gambling, the level of risk of individual types of gambling and their representation on the market should be taken into account.

DESCRIPTION OF THE CURRENT SITUATION

The regulation of gambling expressed in 2016 by the Act on Gambling No. 186/2016 Coll. set the goal of significantly reducing the availability of gambling and reducing the negative impacts of its operation on society as much as possible. In order to effectively meet these goals, this area has been thoroughly examined in recent years and, based on a number of government studies of the impacts of gambling, the conclusions of which are part of the explanatory reports to the legislative regulations, various measures have subsequently been adopted. The direction set by these efforts to regulate gambling, especially those that are the most socially risky, has been beneficial in terms of reducing the negative impacts of gambling.

According to the original form of the Act on Gambling Tax, individual games were divided into three categories according to their riskiness, and based on this division, tax rates were set by related amendments: 21%, 23% and 35% for individual categories. One of the expert sources for this determination was, among others, the Regulatory Impact Assessment (hereinafter referred to as the “RIA”) material for the aforementioned legal norm, which was prepared by the Office of the Government of the Czech Republic in 2014. It is stated on p. 31 that the socio-economic costs of lotteries are low and the social danger of this type of gambling is negligible. The state therefore decided to favor the operation of less risky games.

However, in the autumn of 2019, the then government, based on a parliamentary amendment, announced a sharp increase in taxes for lotteries, which are the least risky type of gambling from the point of view of addiction prevention and treatment, from 23% to 35%. This step was contrary to the principles of rational addiction policy, it favored so-called technical games, and the original intention of the legislator to favor the operation of less risky types of games was completely canceled by this step.

As a result of this step, individual types of gambling are represented in the Czech Republic in an anomalous way compared to other EU countries: lottery, as one of the least risky gambling games, accounts for only 13% of the market compared to the European average, which is 62% of the gambling market. As for the taxation of lotteries as of 2019, after the amendment was approved, the Czech Republic taxed lotteries the most of all types of gambling. From the perspective of rational addiction policy, this is an undesirable situation where the implemented measures in the field of legislation go against 2 expert recommendations and do not take into account the risk aspect of individual types of gambling in the field of gambling taxation.

The current tax burden grading does not correspond to the original RIA to the Gambling Act from 2014 and is also in conflict with the government's program statement, which in the Prevention section declares: "When addressing the issue of addiction, we will apply a policy based on a scientifically proven and balanced concept of risk prevention and harm reduction, while ensuring sufficient funding for both preventive programs and services and the regulation of addictive substances, which will correspond to the degree of their harmfulness."

CONCLUSIONS:

1. There are differences between gambling games in their riskiness in terms of the development of pathological gambling. The most risky are technical games such as slot machines, then live games and online gambling games, including odds bets and especially live bets.

2. The market for gambling via the Internet is developing dynamically. Online gambling is very risky, available 24/7 from any mobile device or computer.

3. The area of ​​illegal gambling has not yet been fully resolved, which poses risks in terms of both zero consumer protection and tax evasion.

4. In terms of the need to increase tax collection overall, the RIA offers suitable solutions, stating that there is room for a significant increase in so-called technical games and another option is to increase fees for slot machines. Moreover, the economic benefits for the state budget in the estimates show that the most suitable way to increase tax collection for the state budget is to tax the part of gambling that has a larger market share more.

RECOMMENDATIONS:

1. Introduce the principle of different rates of taxation of different types of gambling according to their riskiness, so that individual gambling games contribute to public budget revenues and, consequently, to solving problems caused by pathological gambling in proportion to the damage they cause.

2. Cultivate the gambling market towards reducing the riskiness of gambling and offering gambling games with a lower risk profile so that the level of pathological gambling in the Czech Republic decreases.

The legislative initiative of the amendment to the Gambling Tax Act is in line with the above recommendations.

The complete document (CZ):

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