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Sochi offline and online gambling market

October 4, 2016
4 min

On August 19, 2016 Russian Prime Minister Dmitry Medvedev officially signed a decree on the establishment of a gambling zone in Sochi within the territory of Gorki Gorodski resort and partially Rosa Khutor resort in Krasnaya Polyana town. The total area involved is 863.7 hectares.

According to most gambling experts, Sochi is a good area for the development of gambling industry with minimal investments necessary to be invested in the entertainment sector, since the rest of the infrastructure is at a high level.

The fact that the zone is located not far from Turkey should have a positive impact on the tourist flow, since casinos are prohibited in the Turkish region. The important role is also played by the availability of premium class hotel complexes, a lot of gourmet restaurants, bars and other places that attract tourists.

Denis Dziubenko, Slotegrator’s brand manager:

“Along with other gambling zones in the Russian Federation, Sochi does not require large advertising campaign. Everyone is already acquainted with the territory. It has already caught the fancy of both local people and tourists. They know that they can have great time there. And now the territory will be visited by even more people, effecting Sochi economy. In the state where gambling is prohibited, the taxes will rise, with the number of those wishing to play will not decrease. Large operators or organizations will be able tobreak out and build their business. For smaller companies it will be harder.”

What will happen to gambling business if taxes rise?

The Russian authorities are considering mechanisms for increasing gambling taxation in order to provide state budget with large financing. The Ministry of Finance is planning to submit a bill on the increase in taxes by 10 times by the end of 2016. Such a decision was negatively accepted by the gambling community.

Vice President of Gambling operationsat G1 Entertainment, the company which operates Tigre de Cristal Casino in Primorye gambling zone, Dmitry Kozak said:

“The increase of gambling taxation in ten times at once is unlikely. It is difficult to draw definitive conclusions, since the text of the bill is unknown yet. In fact, such taxes are too high for any Russian casino; they just haven’t got such income.”

However, many skeptics do not agree with this point of view, saying that gambling will grow rapidly, though in an online version, i.e. within the World Wide Web. But in such a case the regulation of this kind of business is a global issue, since now it is absolutely uncontrolled.

How gambling zones replenish Russian budget

If to consider Russian gambling zones (Primorye, Azov-City, Siberian Coin, Yantarnaya), which were established at the expense of private investment, the revenue in the near future is ambiguous. According to the data of RNS as of the late August 2016, the Russian state budget has replenished by about 1 billion roubles due to gambling. The leading position is taken by Azov-City with revenue amounting to 864 million rubles since 2011. The outsider is Kaliningrad gambling zone Yantarnaya– 4.6 million rubles within the first half of 2016.

According to Nikolay Oganezov, President of SRO in bookmaking sector, the profitability of Sochi gambling zone will be determined by the number of slots and gaming tables in the casinos.

“The tax on gambling is regional and goes to the treasury of Krasnodar Kraito the full extent. If Sochi has 1-2 casinos, there will be no significant changes in the revenue.” Oganezov said.

According to the tax legislation, the minimum monthly tax is as follows:

  • per 1 gaming table – 200 minimum wages
  • per 1 slot machine – 7.5 minimum wages

Currently, monthly tax liabilities of Siberian Coin, Azov-City and Primorye gambling zones amount to 125 thousand rubles for a gaming table and 7.5 thousand roubles for a slot machine.

Additionally, there are favorable conditions: if the casino hasmore than 30 tables and 40 slot machines, monthly tax rate for each object of taxation exceeding specified amount is 20% lower.

How Russian virtual casinos work

According to the Federal Law No. 244, online gambling venues in Russia are prohibited, but the use of websites is allowed. What does it mean for Russian players? They go to such popular gambling resources as Marathon Bet Casino, Casino Luck, Crazy Vegas etc. and play on the offshore sites, i.e. in gambling venues that are officially licensed by Malta, Australian or any other gambling regulator, by the countries where gambling is not prohibited and taxes for operators are low.

If talking about replenishing of Russian budget with payments made by foreign players, it should be mentioned that the Russian treasury is financed greatly. According to the Ukrainian MP Pavlo Kishkar, Ukrainian gamblers transfer about $1 billion to Russian payment companies daily. The tax is paid, of course, in Russia, and hence the budget funding demonstrates stability and steady profit growth.

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