Russia online betting taxes to rise one hundred-fold

Russian online betting operators are set to face drastically higher taxes from the start of next year, as a new online licence could require them to pay between RUB2.5m and RUB3m (?30,000 to ?40,000) a month to operate in each of Russia’s 12 regions.

The new licensing fee structure, which has been passed by the country’s Ministry of Finance, according to local reports, is expected to take effect on 1 January 2017.

It means an online bookmaker wishing to operate in every Russian region could be paying more than ?5m a year – more than one hundred times higher than the existing fees for bookmakers.

The new taxes are part of an effort to license and regulate online betting, which Russian bookmakers started offering last year.

Russian bookmakers have criticised the changes, claiming that the nascent industry is being treated as a cash cow by the government.

However, Michal Kopec, senior business manager for Eastern Europe at Better Collective, told EGR the new fees were reasonable given the potential scope of the market.

“If you consider the size of the country and the fact that the reported revenue of retail business is at more than ?1bn with 10% profit margin it doesn’t sound like a prohibitive cost,” Kopec said.

He added that bookmakers could lower the cost by focusing on key regions around Moscow and St Petersburg instead of going all-in.

“Making online betting available for punters in Russia is a definitely good move for the country,” he said. “Local operators will definitely go for a licences.”

There are now 31 licensed betting companies in Russia, with licences only available for companies based in Russia and worth at least RUB 1bn (?10m).

However Kopec added that new online-only licences could potentially relax these requirements, paving the way for European companies to officially enter the Russian market.

Currently many European operators accept Russian customers without paying taxes or licence fees, but face IP blocking and banking restrictions.

“The western giants will need to consider their options,” Kopec said. “They will either need to accept the cost or face the limitations placed upon unlicensed operators.

“Some European operators are making enough money in Russia to justify such licence cost. Some smaller operators won’t have such comfort so they will surely ignore the licenses and try to accept Russian players as long as they can.

“It’s all up to details and we still need to wait to see the final regulations,” he added.