Georgia adopted new regulations for the gambling industry in 2022. In 2023, the government decided to increase the tax rate on the sector. New rules increase the gambling business’ profit tax from 10% to 15%, and winnings are now taxed at 5% instead of 2%.
How is the country’s situation at the moment, and have any positive changes been made, George Mamulaishvili, the head of the Georgian Gambling Association (GGA), spoke with SBC Eurasia.
– As there has been a lot of talk about casino closures recently, let’s discuss legislative changes and their impact on land-based establishments. What is your assessment of the current state of the industry?
– Due to the introduction of a 15% gross gaming revenue (GGR) tax and a 5% winnings tax, many casinos were forced to reduce slot machine numbers. There have already been nine closures, including two casinos and slot clubs. The licenses of many casinos were obtained during the pandemic and are about to expire. Once licenses expire, it is likely that several more establishments will cease operating. While it is impossible to ignore the fact that new objects are opening as well. Increase was emphasized with enlargement and centralization of objects.
Its own audience exists in the land-based sector. There is no doubt that online gaming is taking a certain percentage of the market, but in many countries, the land-based sector is well developed. Batumi, for instance, is known for attracting many foreigners to its casinos. Despite this, many are now considering migrating to other markets. Batumi Casino Association and GGA have consulted with government officials, but no changes are expected regarding land-based establishments. In the same way as when the age limit was raised, the effect is negative.
– How has the age limit increase affected the market?
– The majority of players between the ages of 18 and 25, who are now legally prohibited from gambling, have shifted to foreign markets or play from other accounts, which negatively impacts the sector’s positive trend. Significant capital outflows have also resulted from that. It is natural for some money to return as winnings, but some also remains abroad. Additionally, illegal websites are on the rise, which complicates the situation.
The government intended to introduce a mechanism of control and care for the young by restricting gambling for those aged 18 to 25, but it has proved quite difficult to enforce. Since this generation is internet-savvy, it’s easier for them to gamble and make transactions in crypto-casinos, pay through e-wallets, and use VPNs or mirror sites. We can’t block or restrict all of this; it’s impossible.
The state should therefore consider lowering the minimum age to 21. In addition to benefiting business development, this will also benefit society and players. Due to the fact that players between the ages of 21 and 25 will be able to play on the legal market.
Gambling is part of the economy and a legal business in Georgia. Legal businesses should have the opportunity to exist and develop. Moreover, our operators are fully regulated, adhere to the rules, and verify their players. Gambling companies also monitor players’ gaming time and financial spending. Problem gamblers can ruin a company’s statistics and image. There is no benefit to anyone in this.
– Do you see any positive changes in the legislation?
– In June, a law was passed that will exempt foreign citizens from paying the 5% income tax on gambling winnings starting in 2024. Additionally, foreigners and Georgian citizens will have to be registered on different domains in the gambling business. There is a reduction in GGR tax to 5% for foreign players only, and bets can also be placed in EUR and USD. As a result, new operators, investments, players, and new tax revenues will be attracted, creating new jobs and increasing tax revenue.
The government only benefits from such steps. Giving local operators the opportunity to grow will also increase the state’s revenue more than the 5% tax on winnings withdrawals.
The market is growing overall today, even though growth between 2022 and 2023 was only 3-4%. In my estimation, the Georgian market has lost about 20% of its users as a result of gambling prohibitions that have caused them to migrate to other markets. However, this loss was offset by immigrants from Ukraine and Russia who came to Georgia after the war began. It is this revenue that the state mentions is attributed to the gambling business in the amount of 700 million GEL (260 million USD). Player activity also increased by 5%.
– It is common for the government to justify restrictions by citing player protection. How effective are the existing measures for problem gamblers?
– There is a widespread misconception that restrictions can help problem gamblers. It is imperative that everyone understands that gambling is purely for entertainment. Operators adhere to responsible gaming principles, using tools such as pop-up notifications, session interruptions during prolonged play, etc.
The gambling industry has been actively involved in social programs. Among their projects were the construction of neighborhood sports fields and sponsorship of athletes. In 2021, companies spent 40 million GEL (more than 15 million USD) on sports and sports media. Sadly, restrictions have slowed the development of sports media and halted sponsorships.
Developing sports media is crucial to advancing sports and gender balance. As an example, women’s sports cannot be broadcast on national television, which hinders their popularity.
In terms of advertising, if it is broadcast on TV after 12 am and is seen by a minor, it is no longer considered to be a gambling-related problem. Moreover, banning digital advertising – which can be well controlled and managed in terms of content and audience – also makes no sense, since it allows foreign illegal operators to advertise unauthorized.
– It was long believed that Georgia would be a future gambling hub in the region. Is this potential still present in the country?
– Due to its developed tax system and control mechanisms, Georgia remains at the forefront in the region despite the restrictions. Companies like Flutter, Entain, or Betsson operate under a white market system, and they are not interested in the gray market. If the government supports the development of the industry, we can strengthen our position as a hub for international operators.
The state and society will both benefit from this. More investment will be made and more revenue will be generated, as well as a greater number of social projects will be financed by gambling companies. However, for this to happen, we must look at this industry correctly and give it the chance to grow.
There are already a large number of IT companies involved in game development moving to Georgia today. We will therefore regain our previous positions sooner or later. In order to grow further and become a regional and international gambling center, we plan on leveraging all our advantages.
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