Kazakhstan is one of the leading economies in Central Asia and its market offers great opportunities for investors and entrepreneurs. In this article, we will present an overview and analysis of the Kazakhstani market, as well as consider its development prospects based on the expert opinion of George Mamulaishvili, a recognized expert in the field of economics and investment.
In the post-Soviet space, various gambling markets are gaining popularity. However, despite this, they face different problems that hinder their development. If we consider the legislation in different states, we can see significant problems in the legislative attitude towards the gambling business. Therefore, the development of these markets takes place at a snail’s pace. Illegal operators take advantage of this situation and actively deploy their illegal activities, mainly through the Internet.
Many governments and legislators understand that this is a problem, but few dare to accept the gambling industry as part of the economy. As Internet services increasingly play a bigger role in our daily lives, we must understand that illegal gambling will become more and more a part of our daily lives. Governments and legislators should encourage the development of local legal operators to counteract the influx of illegal gambling establishments. Of course, there are many other nuances affecting the development of the legal market, but the development of legal operators is one of the most important factors in counteracting the development of criminal business in this area.
The development of legal operators has its benefits and disadvantages. Many people ask themselves the question: “What exactly does the gambling business bring, except for the gambling addiction among young people and the harm caused by the gambling business to society?” – I can say that this is mere populism. The gambling industry contributes to the development of many related areas, such as tourism, sports, and infrastructure. Industries such as payment systems, IT, marketing, and advertising are developing as well. The development of the gambling industry contributes to the development of the media. And the development of the media directly contributes to the popularization of sports. Therefore, it is always better to have a controlled market than an uncontrolled illegal market.
It is necessary to properly regulate the industry, not set rigid boundaries and prohibitions. The gambling business needs to be controlled, but not by prohibitions but rather by examining the way the question is posed. This will only have a positive effect in the future. If we consider the region as a whole, the practice of bans has shown that they are not beneficial. An example is Georgia, which has the most flexible gambling industry legislation in the region. However, after changes in 2022, due to a number of bans, Georgia got an influx of illegal operators on the market. Today, local operators, despite growth, fall into a non-competitive environment.
Illegal operators do not pay taxes and spend these funds on advertising and attracting players. This results in losses for the state, including a decrease in budget collections and an uncontrolled market since illegal operators don’t follow any regulations. Society also loses because any citizen, even a minor, has access to such illegal operators, and the social background deteriorates every day.
With the development of technology, it is becoming easier for illegal operators to operate in one or another jurisdiction, and it is becoming increasingly difficult to resist the influx of illegal operators. Today, in the post-Soviet region, there are a lot of interesting markets that deserve attention. For example, the Kazakh market is thriving, but due to improper regulations, its legal development becomes questionable. The frequent changes in legislation, which directly affect any investor’s ability to develop and invest in this market, are the first thing that can be noticed. The second thing that can be said is the lack of understanding of the gambling industry on the part of the regulator and the incorrect introduction of zones for the gambling business.
Particularly surprising are the requirements to open bookmakers and sweepstakes cash desks only in two gambling zones, such as the Almaty region on the coast of the Kapchagay reservoir and in the Burabay district and Akmola region. These two directions are not for tourism development. It turns out that if a person wants to sit and cheer for his favorite team and bet on its victory, he must travel hundreds of kilometers and place a bet only there or use an online legal or illegal operator. As practice shows, for the most part, players choose illegal operators.
On the one hand, it can be said that the state is worried about its citizens by not allowing gambling establishments to open within the city to protect the population from gambling addiction. But if you go deeper into the issue, everyone will understand that the state, on the contrary, unintentionally contributes to the development of illegal gambling establishments, so in such a situation, criminal elements try to take advantage of it.
The question arises, Why criminal? Any illegal gambling establishment that does not have a local license, whether online or offline, is considered criminal and illegal, even if it has a license from another state.
The development of the Almaty region (the coast of the Kapchagay reservoir and in the Burabai region) and the Akmola region as tourist regions is possible in other ways. For example, creating free zones or reducing the license fee in these regions is definitely not for bookmakers, sweepstakes, or cash desks of bookmakers since this direction is not considered a gambling direction.
The third issue is the prohibition of opening gambling establishments such as casinos, slot machine halls, bookmakers, sweepstakes, and cash desks of bookmakers and sweepstakes in residential real estate. Prohibiting their placement in the premises of industrial enterprises and their complexes and other production, communal, and storage facilities, buildings of state bodies and institutions, educational, healthcare, and cultural organizations, airports, train stations, stations, and stops of all types of public urban and suburban transport is unreasonable.
Bookmakers and sweepstakes, as well as cash desks of bookmakers and sweepstakes, do not have the profitability to open and develop a separate infrastructure. Therefore, a potential investor loses interest in this kind of activity and business development.
Fourthly, the organizer of the gambling business, carrying out the activities of a bookmaker’s office and totalizator’s office, is prohibited from placing equipment outside the cash desks of bookmaker’s offices and totalizator’s offices that allows bettors to observe the development and outcome of the event, on the result of which they made bets, as well as provide bettors with technical means, including services communication, to access the electronic cash desks of the bookmaker and sweepstakes or information about accepted bets, paid, and unpaid winnings.
It can be understood that it is acceptable and correct to accept bets outside the area of activity of a bookmaker or sweepstakes, but it is illogical to forbid betting participants from observing the development and outcome of the event on which they placed bets. Such a ban contributes directly to the development of illegal operators. Why does this happen? Any person who has placed a bet on a particular sporting result will look for the outcome of that sports result on third-party sites, where there are also many advertisements for illegal operators. Since the systems of work of illegal operators are partially based on prohibitions, they spend millions on developing third-party services to attract players.
It is also not clear what the authors of the gambling law were guided by when they set strict limits for casinos and gambling halls, such as the requirement that the casino should have at least thirty gaming tables and at least sixty slot machines should be installed in the slot machine hall. This issue is easily regulated by the cost of a license, and it is wrong to set minimum numbers of tables and gambling machines. Also, why should only gambling machines meet the requirements set for the corresponding gambling equipment?
To date, many solutions and practices exist on how to control the gambling business and all its processes, including the technical part. Many countries have introduced monitoring and control systems for the gambling business, and legal operators in these countries operate transparently and do not hide anything from the state. However, the legislation of such countries focuses on the fair play of any licensed operator, and the government does not strangle any organization with codes of prohibitions.
There are many gaps in the legislation on the gambling business, and one cannot ignore the problems in the tax code that directly regulate taxation in the gambling industry. Similar to Ukraine, Kazakhstan also has many gaps in the tax code, and it is not clear what exactly the authors of the bill referred to. The problems in the Ukrainian tax code have shown us how badly incorrect legislation and taxation can hinder business development. Speaking about taxes on gambling in the Republic of Kazakhstan, there are two areas of taxation: taxation of gambling business entities (casinos, slot machine halls, betting shops, and bookmakers) and taxation of the player winnings.
The tax on the gambling business has different objects of taxation: for a casino, it is a gaming table; for a slot machine hall, it is a slot machine; for a totalizator or bookmaker’s office, it is a cash desk, which can be either physical (in betting shops) or electronic. Although such taxation is used in many states, the form of taxation is important here. The government regularly indexes the base for calculating the tax amount.
In addition to this tax, casinos, sweepstakes, and bookmakers in Kazakhstan pay corporate income tax (CIT). This is an innovation in 2020; earlier, the organizers of the gambling business were exempt from CIT and instead paid the so-called additional payment. For some reason, the government of Kazakhstan does not perceive the gambling industry as part of the economy and introduces some special taxes into the taxation system, although the financial reporting system differs from other industries. This is a complex financial model that needs to be understood. You cannot put the gambling business on par with other areas of service or trade.
Since 2020, CIT has been taxed on company income at a rate of 20%. At the same time, VAT is deducted from the total income as well as the amount of expenses for the company’s activities. However, it is not clear why.
As mentioned above, the government regularly indexes the base for calculating the amount of tax—the monthly calculation index (MCI); from April 2020 it is 2778 tenge.
And based on this, each gaming table, machine, or cash register is registered with the tax office.
The tax is calculated once a month, and its rate per unit is:
1) game table: 1660 MCI;
2) Slot machine: 60 MCI;
3) Totalizator cash desk: 300 MCI;
4) electronic cash register of the totalizator: 4000 MCI;
5) Cash desk of a bookmaker’s office: 300 MCI;
6) Electronic cash desk of a bookmaker’s office: 3000 MCI
Now consider the tax on winnings.
Winnings from a casino, lottery, sweepstakes, or betting shop are subject to personal income tax (PIT) at a rate of 10%. But you don’t have to pay for it yourself. As a rule, the organizer of the lottery or bet withholds the IIT from the winnings, acting in this case as a tax agent. This means that the player will receive 10% less in his hands, but he will not have to fill out paperwork with tax returns. As a rule, the basis for calculating the tax is the net winnings. Yes, it’s attractive; you don’t have to fill out paperwork, but the very bet of 10% of the winnings can be said to directly affect the player’s decisions to play in other markets.
It should also be noted here that lottery winnings are not taxed. And it is not clear why there is such discrimination in relation to other gambling games. If you look at it logically, the lottery is also a game of chance, and it doesn’t matter if you bet on a set of six numbers or on a sporting event.
It can also be noted that the income of a non-resident from sources in the Republic of Kazakhstan — income in the form of winnings is taxed at 20%, which directly makes foreign players lose interest in playing in the Kazakh market.
To summarize all of the above, if Kazakhstan wants to develop the gambling business, have more legal operators, and most importantly, attract foreign investment, the government needs to radically change its approach to the gambling business. First of all, it is necessary to change the legislation and accept the fact that the gambling business is a part of the economy and brings profit to both the state and society.
Naturally, it should be regulated and controlled, but with such gaps in the legislation, it will be difficult to focus on an honest legal business. Although everyone understands that it is better to have a legal, transparent, and controlled market than a gray or black, uncontrolled market, both the state and society will suffer from this, and this will inevitably lead to incorrect regulation of the industry.
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