The Remote Gambling Association (RGA) has strongly criticised Montenegro's proposed tax on iGaming customers' stakes, warning that the regime is likely to aid black market operators.
The Eastern European country has revealed plans to levy a turnover tax on consumers' stakes, which the RGA says shifts the tax burden to players and makes high-turnover, low-margin games unprofitable for operators.
This, in turn, reduces the value of such products for consumers, cuts demand and therefore reduces tax revenue for the country's government, the association explains. Poker operators will effectively be pushed out of the market, as prize pools are comprised of player stakes with the operator only taking a small rake, with such a system not viable when companies are required to pay a turnover tax, it added.
The association's director of policy and projects Sue Rossiter said the RGA was "very worried" about current developments in Montenegro.
"There is a real threat that legal operators will have to close their businesses soon, and that gap in the market will be met by operators based outside of Montenegro who will pay no taxes," she explained. "It would be extremely damaging for the industry, consumers and the government if all the good work on introducing a regulated market was threatened by excessive taxation."
The government has also proposed a 15 percent tax on winnings, which has already proved unpopular with players. More than 20,000 Montenegrins - almost 3 per cent of the tiny nation's population - have signed a petition calling on the government to cancel or modify this tax rate.
“This tax has to be modified to be sustainable,” the RGA said. “Ordinary customers must be protected from the tax, for example to tax only winnings over €500.”
The RGA proposes an alternative tax regime, based on operators’ gross profits, which it says will “incentivise investment in the market.”
“Operators will adopt a long-term partnership approach with the licensing jurisdiction, financially benefiting both parties and providing the regulatory certainty which is desired in Montenegro,” the association explained. “The gross profits model is administratively simpler, resulting in lower costs for regulators and lower compliance costs for the operators.”
The RGA warned that an excessive tax system would significantly reduce operators' margins, with companies likely to pass this on to customers in the form of higher prices, and ultimately see them lose players.
As a result, it added, companies were likely to pull out of the market, creating more room for illegal operators.