Czech Republic Tries to Kill the Hen that Lays Golden Gambling Eggs

It is foolish to kill the hen that lays the golden eggs – but it seems the Czech Republic tries to do it exactly this with the proposed new Czech gambling laws. The government of the Central European country kept on increasing taxes for both land and online gambling facilities. Now experts warn that too much tax pressure will kill the business.

Analysts are worried about the latest tax on companies who ran betting agencies, casinos (land and online), and online poker sites in Czech Republic. The new regulation was imposed in January 2012 and was the result of the Czech government’s effort to bring its fiscal deficit under 3 percent, as required by the European Union.

For example, according to the Czech gambling law, even a company that takes a bet on sports in Czech Republic is now paying a 20 percent tax on gross wins. The same is true for a company that accepts a bet on basically anything, for example political elections or even the weather.

As Wall Street Journal reports, this new gross win tax comes on top of a corporate income tax of 19 percent. Let’s compare it to the neighboring countries: Poland’s has a 12 percent corporate income tax, Slovakia a mere 5.5 percent – not much more than a quarter of Czech Republic’s.

This clearly puts the Czech gambling industry at the back of the list in terms of competitiveness. The Fortuna Entertainment Group, the largest betting operator in Central Europe paid over 4 million euros of the new tax in the first half of 2012. Their competitors in the neighboring countries in turn didn’t have to pay a single cent.

For the Fortuna Group, the gambling tax lead to a net profit fall of almost 35 percent compared to last year’s similar period. The company has already established an operation in Malta and is thinking about switching to an offshore registration, even though they would prefer to have a base in the Czech Republic.