Montenegro Government Proposes 15% Tax on Gambling Winnings Amidst Concerns

The Montenegrin government has put forward a proposal to implement a 15% tax on gambling winnings as part of its broader fiscal strategy and amendments to the personal income tax law. This move is anticipated to generate an additional €5 million annually for the state budget. However, the proposal has sparked concerns among gambling operators, who fear it could lead to a significant drop in payments from licensed operators and ultimately reduce the state’s revenue from gaming fees.

Potential Impact on State Revenue

The Gambling Operators' Association, a group affiliated with the Montenegrin Chamber of Commerce, has voiced strong opposition to the proposed tax. They argue that similar tax measures in other countries have led to a decrease in payments from licensed operators, which could negatively impact the state's revenue. The association has warned that the proposed 15% tax could result in a 30% decline in payments from these operators, a reduction that would outweigh the potential benefits of the new tax.

Currently, the state earns approximately €22 million annually from gambling concessions, a figure that has been steadily increasing. The association believes that the new tax could jeopardize this revenue stream, particularly if players turn to illegal or foreign online gambling operators to avoid the tax.

This is not the first time Montenegro has attempted to impose a tax on gambling winnings. In December 2014, the Montenegrin Parliament approved a similar tax measure that was scheduled to take effect on January 1, 2015. However, due to the Ministry of Finance's failure to issue the necessary subordinate regulations, the tax was never implemented. As a result, gambling operators did not deduct the tax from players' winnings, and in December 2015, the Parliament repealed the measure altogether. During the debate, a petition with 18,000 signatures opposing the tax was submitted, marking one of the largest petitions ever organized in Montenegro.

Now, nearly a decade later, the new government is attempting to reintroduce the tax. According to the draft personal income tax law, the tax would be calculated as the difference between the wager and the payout. Gambling operators would be responsible for calculating, withholding, and submitting the tax to the authorities by the next working day after each payout.

The Gambling Operators' Association has raised several concerns regarding the technical implementation of the proposed tax. They have pointed out potential conflicts between the new tax law and the existing Gambling Act, emphasizing the need for clear definitions of "winnings" and "wagering" to avoid complications in tax calculation. The association argues that without clear definitions, there could be significant challenges in implementing the tax, particularly given the varying ways different forms of gambling—such as casinos, slot machines, betting shops, and lottery games—treat wagers.

The association has also highlighted concerns about the lack of a clear definition for "wager" and the timing of these calculations. They argue that this lack of clarity could complicate the implementation of the new tax and lead to further challenges for gambling operators.

Regional and EU Practices

In neighboring countries, the approach to taxing gambling winnings varies. Croatia and the Federation of Bosnia and Herzegovina, for instance, have had similar taxes in place for over a decade. In Croatia, winnings under €100 are exempt from the tax, while in the Federation, winnings under 100 marks (€50.5) are also exempt. Both countries have reported a decrease in revenue following the introduction of these taxes, raising concerns that Montenegro could face a similar outcome if the proposed tax is implemented.

In contrast, the Republic of Srpska does not impose a tax on gambling winnings, which has led to a migration of players from taxed jurisdictions to online platforms that are not subject to such taxes. In Croatia, tax rates on lottery and betting winnings vary, ranging from 10% to 30%, depending on the amount won.

At the European Union level, there is no standardized approach to gambling taxation, allowing member states to establish their own regulations. This has led to significant variations in tax rates and coverage across the EU, further complicating the issue for operators who must navigate these differing regulatory environments.

The proposed 15% tax on gambling winnings in Montenegro has sparked significant backlash among both operators and players. A petition has been launched urging players to oppose the amendment to the personal income tax law, which mandates the deduction of 15% from each winning bet. The petition argues that this tax, combined with the existing tax on games of chance, effectively amounts to "a tax on a tax" and contradicts both Montenegro's Constitution and international practices. Operators warn that this could lead to the collapse of the legal gambling industry in Montenegro, potentially leaving players without legal gaming options and thousands of employees out of work. The petition aims to gather at least 6,000 signatures to propose changes to the law in the Montenegrin Assembly.

Source:

''Government proposes 15% tax on gambling winnings: Aims to generate €5 Million annually'', montenegrobusiness.eu, August 14, 2024.