The Czech Government Has Taken This Measure

30 August 2012 – By Linda Jefferson

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This week, the Czech government is in the news in matters concerning European online gambling. Online casino operators in this country issued a severe warning for the government in power in the Czech Republic. Gambling companies that have operations here said that if the government continued raising both retail and online gambling taxes then it would trigger an exodus to more tax-friendly jurisdictions.

The gambling taxes were increased in January 2012 by the Czech government. The reason was, according to the government, the Czech fiscal deficit agreed for European Union countries that must not exceed 3 % of gross domestic product. Therefore, online casino operators had to pay a 20 % tax on gross wins in addition to a corporate income tax of 19 %. This level of taxation is very high compared with similar neighboring countries. The tax rate set by the Czech Republic government is nearly double that of 12 % in Poland and almost four times that of 5.5% in Slovakia.

The largest gambling operator in Central Europe, Fortuna Entertainment group, has had serious problems due to these high rates of online gambling taxes. The company’s CFO said that Fortuna group has paid over € 4 million in taxes in the first half of 2012, placing them at a competitive disadvantage with foreign rivals in the Czech market that paid no tax. Fortuna Entertainment’s Chairman added that the company’s net profit fell 35 % due to gambling tax, despite an annual increase in gross wins of 15 % and a 10 % annual increase in revenue from bets and lottery.

The group’s representatives said that Fortuna would prefer to operate from within the Czech Republic, but after these measures taken by the government, they have to prepare back up plans in order to remain competitive. Therefore, Fortuna has already established a Malta operation and is ready to switch to an offshore registration. This move would lead to a lower tax bill and if the situation does not improve by the next Annual General Meeting of shareholders the company will move to Malta. Analyst say that the tax increases are likely to prove counter-productive for the whole online casino industry in the Czech Republic.

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