President turns down legal changes allegedly easing gambling tax burden

Tirana Times
By Tirana Times August 1, 2018 12:41

President turns down legal changes allegedly easing gambling tax burden

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  • “The promotion of this business model through an easier tax regime has a negative effect on the state budget, is harmful and no productive at all for the Albanian economy, is not based on sustainable socio-economic arguments and does not guarantee a healthy development of the Albanian society,” argues the president

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The following is an updated version of the online article that appeared earlier on Wednesday, Aug.1  

TIRANA, Aug. 1 -  Albania's President has turned down some legal changes to the gambling tax by exercising his suspensive veto, arguing the proposed amendments reduce the tax burden for gambling operators and fail to discourage what is considered a booming business in the country with negative effects for one of Europe’s poorest countries.

The president’s office argues the legal changes approved by the ruling Socialists in early July cut the gambling tax to 15 percent of gross earnings compared to a current 15 percent turnover rate, significantly reducing the tax burden on gambling operators.

Meanwhile, the finance ministry argues the sole change to the 2015 gambling law is that the gambling tax on the loss-making Austrian-run national lottery has been unified to 15 percent.

In his decree returning the legal changes for reconsideration by Parliament, President Ilir Meta says easing the tax burden on the gambling industry is a serious barrier to the country's sustainable economic and social development.

The President argues the legal changes promote gambling and disorientate households in earning livelihoods and meeting daily needs through unproductive activities.

“The implementation of the legal changes would only benefit gambling businesses at a time when the expected effects on the state budget or household economy are negative. Article 6 of the law also runs counter to meeting Albania's social targets and legislation in force discouraging gambling activities and increases the probability of negative phenomena on Albanian households,” argues the president as quoted in a statement.

"The gambling business model does not produce added value for the society, on the contrary the expansion of this industry brings potential risk that impoverish Albanian households and cause social drama,” adds the president’s press office.

The President also argues the legal changes run counter to the government's will and stance against gambling whose informality it fought through a nationwide campaign in late 2013 and the latest initiative to move casinos to suburban or tourist areas.

“The promotion of this business model through an easier tax regime has a negative effect on the state budget, is harmful and no productive at all for the Albanian economy, is not based on sustainable socio-economic arguments and does not guarantee a healthy development of the Albanian society,” concludes the president.


Gov’t denies lower tax claims

Reacting to the president's decree, the finance ministry said there was no easier tax burden but only a unification of the 15 percent tax rate on gambling industry, which in the case of the national lottery operator was applied at lower 10 percent.

The ministry says gross income under the existing law is also calculated as the amount remaining after the distribution of profits to gamblers and not as a rate on total turnover as the president’s office has misinterpreted it.

"There is no change to the gambling law and no relaxation as far as gambling taxation is concerned, on the contrary there is unification for all gambling categories. If the changes turned down by the president, don't become effective, then we will have differentiated treatment for a market operator that will continue to be taxes at 10 percent," the finance ministry said in a statement.

Austrian Lotteries launched its Albania operations in 2013 after it was given a 10-year licence to organize Albania’s first ever national lottery and offered a 10 percent tax rate. Back in mid-2016, the Austrian Lotteries Albania operations were taken over by another Austria-based company already present in Albania with a chain of electronic casinos following accumulated losses.

A booming business

Gambling is a booming business in Albania and varies from casinos to sports betting. Thousands of betting shops are scattered across the country. A gambling law, which has been in force for several years, bans people under 21 from entering betting shops, but regardless, teenagers are often seen there.

In late 2013, the then Socialist Party-led coalition undertook a nationwide campaign "End of Madness" to tackle high informality in the sector but data shows gambling companies have been paying less in taxes despite Albanians significantly increasing their spending.

Albanians reportedly spent a record 16.6 billion lek (€132 mln) in gambling in 2017, up 10 percent compared to the previous year, according to turnover data reported by the main electronic casino, lottery and sports betting companies.

In a report on inspections carried out in the first half of 2017, the Supreme State Audit said it identified about 50 billion lek (€395 million) in income that state authorities failed to collect from 2014 to 2016. The revenue miss is related to the Gambling Supervisory Authority’s failure to impose and collect fines following seizure of games of chance equipment, often operated informally or not meeting technical requirements.

In late 2016, the ruling Socialist Party-majority approved a two-year extension to a law disciplining gambling in downtown areas, citing concerns over gambling businesses not being ready to move to tourist attractions, the possible spread of illegal gambling and the state budget losing millions of euros in taxes, in a move which came following apparent successful lobbying by the lucrative gambling industry. The law, initially scheduled to come into force in January 2017, will now be implemented starting 2019 unless a new extension takes place.

Albanian authorities have selected an Austrian-Polish-Albanian concessionaire to set up, operate and maintain an online central monitoring system on Albania’s gambling industry for the next 30 years.

The government says the concession is aimed at preventing tax evasion and money laundering in the industry which employs about 1,800 people and generates more than $125 million in annual turnover.

Second presidential veto in few days

This is the second time in a few days that President Ilir Meta has returned bills to be reconsidered by Parliament where the majority can still use their votes to turn the bill into law at a time when the country’s constitutional court is non-operational due to a vetting process underway as part of a judiciary reform having dismissed several judges after failing to justify their financial assets.

President Meta has also exercised his suspended veto power on a bill paving the way for the demolition of an Italian-built WWII building in downtown Tirana that has served as the country’s national theater for about eight decades in a controversial project that has divided Albanian politicians and actors. The new contemporary architecture theater is supposed to be built by a private company in return for being offered public land to build business towers next to it, but the president argues the bill has violated market competition through its negotiated procedure and fails to preserve national heritage values.

Meta is a former experienced politician who has served as the country’s Prime Minister and Parliament Speaker and also led the country’s third largest party for more than a decade until he took office as president in mid-2017.



Tirana Times
By Tirana Times August 1, 2018 12:41