One of the founders of the gambling industry during the later years of the Soviet Union says a plan to legalize online casinos will boost Russian treasury revenues and scupper the illegal betting sector.
Tax revenues from the gambling industry have plummeted since Russia restricted operations to designated zones, the gambling expert and former industry chief Dmitry Slobodkin said during an interview with the Russian media outlet NSN.
Online casinos remain illegal in Russia, but government ministries complain they are struggling to enforce the ban.
“We need to somehow legalize online casinos […] because prohibition always creates a desire to gamble,” Slobodkin said.
The expert said the Russian gambling zone model had failed, and had caused the loss of “colossal amounts of money from the budget.”
Online casinos would be a first step that could be followed by allowing cities of over 1 million inhabitants to open casinos, Slobodkin explained.
“Casinos need to be opened in cities with a population of over a million. Otherwise, there will be no budget revenue from the sector,” he said. “The government must be tough on the gambling industry, as is the case in every country.”
Russian Online Casino Ban to End?
Slobodkin was speaking as the Kremlin continues to mull a controversial proposal by the Ministry of Finance to legalize online casinos.
The ministry says the state should tax operators at a rate of 30% per year, minus payouts to players.
Advocates say this will help boost the state budget by hundreds of millions of dollars per year.
But critics claim the move will instead drive up already spiraling adult and youth gambling addiction rates.
Revenues and profits have taken a downturn in recent months at several of Russia’s gambling zones, following several consecutive quarters of upward growth.
Industry chiefs blame Russia’s worsening economic situation for the fall, saying the financial downturn is “not conducive to gambling.”
The Kremlin, however, is doubling down on the gambling zone plan.
Several casinos are planning revamps this year, and work is beginning on new gambling facilities in multiple zones. And Moscow has approved an ambitious Sberbank-backed casino project in the heart of Siberia.
Slobodkin, however, pointed to the success of the illegal online casino sector, which is fast outpacing land-based, legal alternatives.
“It’s impossible to estimate the size of the [illegal] market,” he said. “But we need to find a way to legalize online casinos, as has been done in other countries.”
Russian Gambling Zones ‘Not Successful’
The gambling expert hit out at Moscow’s policy of restricting land-based gambling to designated zones, claiming that “nobody really wants to visit” the casinos in the zones.
“Underground gambling dens operate in virtually every part of the country,” Slobodkin said. “The public’s need to wager money remains. That’s why residents continue to gamble.”
Slobodkin said trying to restrict gambling to certain zones was “counterproductive because it doesn’t benefit either the state or the people.”
The expert noted that in 2005, the government earned around 305 billion rubles (currently worth $4.2 billion) from taxing the betting industry.
In recent years, that number has shrunk to under $21 million, despite the tax rate almost doubling in the interim.
Gambling Industry Needs Its Own Tax Regime, Says Expert
Slobodkin called on the Kremlin to devise sophisticated taxation methods based on third-party audits. He also said operators should be taxed at a fixed rate per unit of gambling equipment they operate.
“We need accounting guidelines specifically applicable to gambling establishments,” he said.
Many lawmakers remain bitterly opposed to legalization plans. Key members of the State Duma claim they are on the verge of passing a bill that seeks to ban online casino advertisements.
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