The gambling business in the EU countries shows a steady growth, although a lot of operators prefer to work illegally. It was reported by Vladimirs Remi, a co-owner of MONT AZURE, providing services in financial consulting and developing fintech projects. In the interview for our media office, the expert listed difficulties faced by entrepreneurs when launching a business in Latvia and told us how the European gambling industry is developing.
Interviewer: Riga Gaming Congress (RGC) ~ Speaker: Vladimirs Remi (V.R.)
RGC: You are engaged in the development of fintech projects and regulation of the financial business within the EU and UK. Tell us about the gambling situation.
V.R.: Currently, a huge part of the gambling business is illegal. Customers interested in establishing a serious business with all required licenses are quite a rare phenomenon. Rather on the contrary, the majority part of market participants are constantly looking for a jurisdiction with tax remissions and simplified licensing. It is a short-term operation model. And the establishment of such a business requires the same amount of time and money as the establishment of a licensed casino.
We recommend our customers only the legal business model and try to show that it is not as difficult and expensive as it seems at first view. We help them to structure a legal base, choose an appropriate jurisdiction and operation model. Fortunately, more and more online gambling projects are launched today. It brings the industry to the high level and provides it with a new development line. We believe that regulators should have a more positive attitude to this market segment.
As to the financial business, leading countries are still the following: Great Britain, Cyprus, Malta, and Ireland. The rest EU states have a very bureaucratized and expensive business tax and regulation system. Lithuania is currently showing a strong position, but it is too early to make conclusions.
RGC: How can one license a gambling venue in Latvia? Does this process have any pitfalls?
V.R.: It is Lotteries and Gambling Supervision Inspection (https://www.iaui.gov.lv/lv/) that regulates the gambling business and lottery segment in Latvia. There are a lot of pitfalls. For instance, international business representatives should overcome a language barrier. Unlike its neighbors considering documents in English (it is the EU official language), Latvia accepts all papers only in a state language. Consequently, one should find a specialist among local citizens. Besides, there are few specialists and their services are quite expensive.
Another significant aspect is civil servants. The Latvian Republic does not deal with businesses and their growth. Public officials very aggressively treat both businesses and citizens. They believe that they have a higher status and forget who pay for their work. The business licensing process is extremely expensive and requires lots of time and patient. Moreover, difficulties do not end after obtaining a license. One should get ready for a capital generation procedure and state duty payments. Beginning entrepreneurs have to confirm each cent attracted to the company for obtaining a license as well as to prove their financial solidity.
The gambling business in the country is hardly developed. There are several licensed market participants, working for the local community. Some years ago, the market regulator destroyed this segment in the acquiring sector by prohibiting banks and financial institutions to process gambling transactions. Many Latvian banks and other players were submitting petitions, arguing that transaction technical processing and money transferring were not related to the Gambling Inspection. However, everything was in vane. As the result, the lion’s share of profit left the country due to the incompetence and absolute indifference of civil servants.
RGC: Is it easy for a foreign operator to enter the Latvian gambling market?
V.R.: If operators have the EU license, they won’t face obvious difficulties. They will be able to obtain a permit for their activity in Latvia much easier than new market players. However, economic efficiency is a different story. The country has around 2 million people, although in fact there are 1.5 million citizens. Only a half of the population is economically active. So, let’s figure out how many people can provide venues with income. And do not forget about costs for starting and growing a business in Latvia.
I would recommend our customers not to waste money but rather consult the regulator in order to realize the whole situation.
RGC: In March 2017, the Ministry of Finance of Latvia offered to increase a gambling business tax by 30% and to recommence a wining tax. In fact, the government prevents the gambling business development.
V.R.: The government follows such a policy regarding all kinds of business in the country. It tries to increase its budget by means of taxes and does not understand that Latvian entrepreneurs actively establish their businesses in other EU countries with more favorable attitude to this activity and special beneficial zones for its growth.
And taxes aren’t the point. In Scandinavia and Central Europe, for example, the tax control is even stricter and fees are higher. What plays a significant role in this issue is the opportunity to run a business. The UK offers special zones for testing businesses as well as has transparent and clear licensing regulations. When entrepreneurs are able to earn money, they pay any taxes. Latvia does not provide them with such an opportunity.
RGC: In other words, establishing the gambling business in Latvia is unprofitable, isn’t it?
V.R.: Absolutely unprofitable. Government supervision, taxes and regulation will take a huge amount of income. Besides, one will have to compete with other advanced EU countries, for instance, with Great Britain, as well as to invest in marketing and company image two times larger than their colleagues.
It will be too hard to develop the gambling or any other business in Latvia until the government changes its attitude to entrepreneurs.
RGC: How rapidly does the EU gambling market grow? Can you confirm your words by figures?
V.R.: The gambling business shows a steady growth. However, it refers to such segments as online casinos and lotteries. There is still a great share of the illegal business due to various factors. Over the past 5 years, we have seen a reducing activity in the acquiring organization sector. Almost no new players of this segment were noticed.
This year, we have been surprised by the increasing interest to eSports competitions. ESports betting is a new stage of the gambling business development and opportunity for good incomes.
Unfortunately, we can’t share figures, as one part of such information is confidential and another one will be presented at the conference.
RGC: What will you tell about at Riga Gaming Congress 2017? What target audience will find your presentation especially interesting?
V.R.: The presentation will be dedicated to the current condition of the Latvian market and its regulation. I hope we will obtain official comments from the government regulator regarding the future and development of the market. I will try to describe the relevant situation as fair and square as possible so that all participants could decide whether it is worth to start a business within the Latvian Republic or not.
I will also provide official comments from Latvian banks, which I am going to interview.
The target audience of my presentation includes business owners and top managers, in other words, decision makers and those developing this industry.
Vladimirs Remi will speak on October 12 within the second part of the business section at Riga Gaming Congress 2017. You can register for the event following the link.