Costs About to Soar for Online Operators in Russia

The costs of running an online gambling operation in Russian are about to soar according to Nikolai Oganezov of the Bookmakers Self-Regulatory Organization.

Oganezov was speaking with the online gambling industry magazine – bookmakersrating.ru – when he revealed that the Russian government intends to impose a tax on online gambling revenues up to one hundred times higher than is imposed on their sports betting operations at present.

Commenting that regulated online gambling in Russia is still in its infancy, Oganezov criticised the new tax, the way it was calculated and the lack of transparency in the public process. He said there was a tendency in government to regard the betting business as a cash cow, and he warned that taking too much out of the regulated online industry at this early stage would handicap its prospects for growth.

How the “One Hundred Times Higher” Tax Hike Works

The claims of taxes up to one hundred times higher are a little difficult to fathom out for people used to working in percentages. However, what it appears licensed online bookmakers are being asked to pay is a license fee for each of Russia´s twelve jurisdictions. Currently online bookmakers pay upwards of RUB 25,000 ($366) per month for each of the jurisdictions they operate in.

Under the new proposals, Russian online gambling operators will be required to pay a minimum monthly fee per jurisdiction of RUB 2.5 million to RUB 3 million ($36,600 to $43,900) – making it unlikely that many will be able to afford a nationwide presence. The new licensing fee structure has apparently been okayed by the Ministry of Finance and takes effect on January 1, 2017.

Bookmakers Also to be Hammered by Culture and Sports Contributions

In addition to the increased licensing fees, online bookmakers will be forced to pay up to 5% of their revenues to Russian sports federations following an amendment to the Physical Culture and Sports regulations. A minimum “contribution” of RUB 3 million ($44,000) each quarter will have to be paid to each of the five sports federations – meaning that each online operator will be liable for a minimum of RUB 60 million ($888,000) per year.

Oganezov commented that these contributions were unrealistic and the numbers appeared to have been plucked out of the air. He told bookmakersrating.ru that the flight of imagination of our legislators never ceases to amaze him, and insisted that online bookmakers should have some input into how the contributions were managed by the sports federations in order to minimise corruption.

Plus there are the Costs of Payment Processing

Punters enjoying a bet in Russia´s newly regulated online gambling industry will recently have become aware of TSUPIS – the centralised online payments processor through which all transactions are processed. All gamblers placing a bet at a licensed Russian online bookmaker must have a TSUPIS account (it works a bit like Skrill or Neteller) for both deposits and withdrawals.

TSUPIS has ostensibly been set up to comply with money laundering regulations, but the government also gets vision of all the transactions passing through the hub – enabling it to tax winning punters. As far as the online bookmakers are concerned, each transaction through the TSUPIS platforms is subject to a commission of 1% – costing the industry billions of roubles each year.

What are the Implications for Online Poker in Russia?

At present, online poker is illegal in Russia. Proposals to regulate online poker in Russia have been floated for years and, in last year´s Q4 report, Amaya Gaming CEO David Baazov said he was confident 2016 was the year that issues surrounding online poker in Russia would finally get resolved. (Maybe he had some inside information into President Putin´s thoughts!).

The Russian market currently accounts for 8.4% of PokerStars´ player database, and – if the same licensing fees and taxation standards are applied to online poker as are going to be applied to online bookmakers – PokerStars would probably be the only operator capable of surviving in such a highly-taxed market.

It is not yet known whether a future regulated online poker marketplace would be ring-fenced but, if so, it is imagined that there would be a similar scenario in Russia as there was in Spain and France (and soon to occur in Portugal) – where the decent players emigrated, leaving behind much softer games but harder to beat rake and fewer player rewards.