Czech Republic Struggling to Collect on International Gambling Fines

Czech Republic Struggling to Collect on International Gambling Penalties

Last Thursday, the Czech economic journal E15 published a scathing report about the government’s inability to collect on the CZK455 million ($20.4 million) in fines it has imposed on those gambling companies operating without online licenses since new legislation was introduced on January 1, 2017. According to the report, just CZK240k ($10,750) of that amount has since been retrieved, with the media outlet calling out the government for not having powerful enough tools to compel operators to pay their outstanding fines.

Difficulties Acknowledged

Since a new regulatory regime came into force at the start of 2017, a total of 116 unlicensed gambling companies have been added to the Czech Republic’s blacklist of illegal operators. The Ministry of Finance, which is responsible for regulating the nation’s gambling industry and issuing licenses, has also issued a total of 24 fines for firms contravening the rules, but has had little success compelling transgressors from stumping up the cash.

Ministry Response

The Ministry has been quick to respond to criticism coming from the news media, and in an article posted on its website stated that it was not an easy task persuading those operators not physically based in the Czech Republic to pay their fines. In its statement, the Ministry used Caribbean based operators as a prime example of those businesses flaunting or delaying payment.

However, the Ministry of Finance added that “the main purpose of the fines is not the enrichment of the Treasury, but the restriction of the illegal offer of gambling,” before adding that “fines have not only a restrictive but also a preventive effect.” In other words, any gambling company looking to legally operate in the country at some stage in the future would have to first pay its fines before even being considered for an official license.

Slot Machine Failings

In its critical piece, E15 also accused the government of not honoring its commitment to reduce the number of slot machines in the country. Despite falling from a high of 47,144 machines in December 2017 to just 31,054 at the beginning of 2018, it would appear that their numbers are on the rise once more. Apparently, there are around 39,506 slot machines still operating in the Czech Republic, with E15 implying that the government has  allowed their increase after seeing its quarterly tax receipt from slots falling by half to around CZK1 billion ($45m), despite pushing up its slots tax rate from 28% to 35%.

Disputing the claim, the Ministry said that the sharp drop in slot machines noted at the beginning of 2018 was due to a number of licenses expiring around that time. In addition, it has stated that an inefficient licensing system was previously in place which allowed a logjam to develop, but since the contracting of a testing firm tasked with approving new slots units, the backlog has been reduced resulting in around 8,500 extra machines launching this year.

The Ministry issued a further statement standing by its record to date, explaining that the situation pales in comparison to the 74k machines that existed in the country back in 2012, with their number of establishments offering slots having dropped by two-thirds since 2015.

$1.77 Billion Market

Following its regulatory revamp, the Czech Republic’s regulated gambling market reported a modest 1.1% revenue increase to CZK39.8b ($1.77b) for 2017. Online gambling subsequently accounted for around one-fifth of the overall total after its revenue shot up by 56% to CZK8.3b ($370m) compared to 2016. The huge gain came despite a number of major online gambling operators choosing to quit the market rather than pay the excessive new tax rates imposed, which includes 23% on sports betting, and 35% on slots, in addition to the country’s standard 19% corporate tax rate.