Ukraine gambling bill ready for second reading

4 June 2020

A bill to legalise and regulate both online and land-based gambling in Ukraine has been approved by the Committee on Finance, Tax and Customs Policy in the country’s parliament (Verkhovna Rada) and is now ready for a second reading.

The governing Servant of the People Party announced the committee’s approval of the bill yesterday (3 June).

"The Committee almost unanimously supported the formation of a new gambling market and now asks for the support of the Verkhovna Rada.” Servant of the People deputy and Committee on Finance, Tax and Customs Policy member Andriy Motovilovets said. “We are fully ready for the second reading.”

The bill, 2285-D, was introduced by Oleg Marusyak as one of six alternatives to the reforms submitted by the Servant of the People Party-led government in Parliament in October 2019. It passed a first reading in January 2020, after being rejected in an initial vote in December.

The committee has made changes to the bill since its first reading which have not yet been published.

Deputies Halyna Vasylchenko and Yaroslav Zhelezniak, both of opposition political party Voice, said they left the committee hearing early in protest against some of the changes made from the first bill. These include removing the limit on the number of gaming machines in the country, previously set at 40,000, and the provision blocking machines being placed within 500m of a school.

In addition, Vasylchenko and Zhelezniak said they wished to see slot machines limited only to five-star hotels rather than also allowed at three and four-star venues.

The version of Marusyak’s bill that was passed at the first reading includes a licence fee for online gambling of UAH59.0m (£1.8m/€2.0m/$2.2m).. The initial version of the bill also included a minimum licence fee of UAH141.6m for casinos in hotels with 200-250 rooms and a fee of UAH283.3m for casinos in hotels with 250 or more rooms. These licence fees will track the country’s minimum wage to adjust for inflation.

The bill would determine bookmaking licences through a system where each licensee would have the rights to open 5 betting shops. Licences would awarded by region, with 32 licences to be made available in Kyiv; 16 between Ukraine’s other large cities of Odes and Kharkov; and a further 32 in the rest of the country.

If the bill is passed, the Rada must also pass another act to setting out how the industry will be taxed. Currently, there are four different gambling tax bills for the Rada to consider.

A bill jointly submitted by Marusyak and Marian Zablotskyi, Bill 2713, sets the tax rate for all gambling and lotteries at 25%. An alternative - 2713-1, submitted by Dmytro Natalukha - proposes a 7.5% GGR tax rate from bookmaking, 12.5% from online gambling and 22% from lotteries.

A third, 2713-2, put forward by Oleksandr Dubinsky, also looks to establish a flat tax rate of 25% of GGR for all forms of gambling: online, land-based and lotteries.

Finally, bill 2713-3, put forward by Artem Dubnov, would scrap specific gambling taxes entirely, with the government making money from the industry only through licence fees and normal business and income taxes.

After bill 2285-D was initially rejected, president Volodymyr Zelensky said he would begin to enforce Ukraine’s anti-gambling laws much more strictly. Since then, Ukrainian courts have issued blocking orders to many unlicensed igaming sites, including a list of 32 in February and a further 59 in May.

The Ukrainian Association of Telecommunications Operators (Telas), the Internet Association of Ukraine, the Telecommunication Chamber of Ukraine and other telecommunications bodies appealed to the Committee on Digital Transformation to put an end to these blocking orders.

The Committee of Digital Transformation then submitted a recommendation to the Committee on Finance, Tax and Customs Policy to ban these orders in the new bill. However, it will not be clear whether such a provision is in the final bill until it is published.