ARTICLES / Moldova

Intergaming magazine: “Moldova considers a new tax on casinos”

Chisinau, Moldova – Moldova is one of the smallest and poorest countries in Europe – the population is 3.5 million
and the average monthly salary is just over 130 pounds. However, there are hundreds of casinos there, if you trust government data – and even more, if you trust your own eyes. Some street corners in the capital city Chisinau
have four casinos competing for customers with blinking neon lights. And even in towns that are
too small to have their own movie theatre there are often several gambling halls. But now a new government initiative aims to impose a new tax on the industry that until now enjoyed some tax exemptions.

At the end of November, the acting prime minister of Moldova Gheorghe Brega called for the removal of casinos’ tax exemptions. He requested the Ministry of Finance, the Ministry of Economics, and the Ministry of Justice to come up with new recommendations on taxing the casino industry, according to a press release on the Moldovan government’s website.

Currently Moldovan casinos do not pay the VAT (Value Added Tax), which in Moldova is 20 percent. Only the customers’ winnings are taxed. Casinos, instead, pay annual license fees on their tables and slot machines.
The acting prime minister’s suggestion follows the comments of the chairman of the government’s Court of Accounts (auditing office), Serafim Urechean, who called the casino industry’s tax exemptions “complete nonsense.”

“Just imagine the tax exemptions for casinos in the amount of 80 million lei (2.7 million GBP)!” said Urechean (who also happens to be a former mayor of Chisinau, a former member of the Moldovan parliament, and a former prime minister of Moldova) in November. “This is complete nonsense. Has everyone gone crazy? Are casinos operating at a loss? Have we all lost our minds? Forgive me for being harsh, but there is no explanation for this.”

Casinos began opening in Moldova soon after the fall of the Soviet Union, and have been exempt from the Value Added Tax from July of 1998. In the last ten years, the number of casinos in the country increased approximately five times, some observers here say – and their numbers are still going up. According to government data, there are 56 casino companies in Moldova, and each company operates several branches. In 2013, for example, there were 310 casino halls across the country, according to the government.

But representatives from the local casino industry say that imposing a tax on the industry that already pays high licensing fees is unfair.

“We already pay for licenses and authorizations and plus we have to pay taxes? In normal countries, either you pay for licenses or you pay taxes, but here they want us to do both,” says Alexander Motynga, the general manager of the Eldorado casino company that has 26 locations in Moldova. “The cost of licenses and authorizations keeps going up.”

The annual license fees for a casino table increased from 90,000 lei (3,000 GBP) about eight years ago to 576,000 lei (20,200 GBP) today, while the annual license for one slot machine went up from 3,600 lei (120 GBP) to 23,100 lei (770 GBP) compared with eight years ago, according to Mihail Zabudskii, the general manager of Moldova’s largest casino, Napoleon Palace.

Napoleon Palace has 56 slot machines and 12 casino tables.

“Every year or every other year the price of licenses goes up,” Zabudskii said. “We already pay more than 8 million lei per year – and that’s just the license fees. That money goes into the government’s budget.”
Indeed, according to information from the Moldovan government, the amount of money the government collects from casino licenses increased from 67 million lei (approximately 2 million GBP) in 2011 to 92 million lei (about 3 million GBP) in 2013.

Motynga warned that if the government imposes a new tax on casinos, many companies will have no choice but to go out of business.

“I think the proposal will not pass. You can’t tax a business twice,” he said. “The Gaming Business Association would probably take them to court.”

Other than taxes, another ongoing battle for the Moldovan casino industry is over the government’s ban on casinos advertising their services, which went into effect in 2014. According to the ban, casinos may not promote themselves even online or on social networks, Zabudskii said. Some in the government interpret the law to mean that a casino cannot have its own website.

“But I ask, ‘How can we attract foreign tourists if we can’t have a website?’” Zabudskii said.

Napoleon Palace plans to go to court this month over its right to keep its website, Zabudskii said.

According to Zabudskii, casinos are good for the Moldovan economy because they attract tourists to the country, which otherwise offers “nothing to see.”

He estimates that about 40 percent of his customers are foreigners, particularly from Israel and Turkey, where casinos were outlawed in 1998, as well as from Russia and Ukraine that closed down or restricted their gaming business in recent years.

“When we bring people here, we generate jobs for airlines, nightclubs, and hotels. We attract money in to the country,” Zabudskii said. “This is an important point that authorities don’t seem to consider for some reason.”
Motynga agreed that casinos serve an important purpose.

“The opinion that everyone in Moldova is so poor and casinos take their money away, I don’t agree with that,” he said. “Going to a casino is a way to relax – just like bowling, just like playing pool.”

He said people frequent casinos for various reasons. Some come because they like to be treated with respect. Others come because they like feeling like they are in another world, and some, as strange as it seems, enjoy losing money, he said.
“It’s like some people get a high out of losing, it’s a kind of masochism,” he said. “We don’t force anyone to go there. People come on their own to play because they enjoy it.”

Whatever the reason, it is not uncommon to see customers playing away at slot machines for 48 hours at a time, he said.

Most casinos in Moldova are modest one-room venues, with a few slot machines and just a couple of male clients. Sometimes there are legal notices on the wall. They state that persons under 18 years of age are not permitted to play, that those who are drunk or high cannot come in and that those who spend five minutes without playing must leave the premises. When a woman walks through the door of these casinos, everyone’s heads turn – for in Moldova, women don’t frequent these places.

On a recent Friday evening, one young man from Russia was bending over a roulette table with shiny eyes at GameWorld casino in MallDova, the largest shopping mall in the country. He was drunk, and unaware of the late hour.
When asked for how long he has been playing, he asked, “What time is it?” And then he remembered that he hadn’t eaten anything for 11 hours.

The 23 year old, who said his name was Andrey, lost more than 100 USD – not his own money, because he is unemployed, he said, but his wife’s.

When asked about why he came to the casino, he said, “Let me put it this way: There is nothing else to do in Moldova.”

SIDEBAR: Moldovan Poker grows in popularity

Poker clubs are regulated differently from casinos in Moldova.

According to Alex Furman, who organizes poker tournaments in Moldova, poker clubs are categorized as sports venues here.

There is currently one official poker club in in Moldova (called Courage) and a couple of unofficial underground clubs, Furman said.

Poker clubs began opening in Moldova about six years ago, he said. About a half year later, the Moldovan Student Poker League was formed and the Poker Federation of Moldova was created about four years ago. At that time also, poker was officially given the status of an “intellectual sport” – similar to chess, Furman said.

About five years ago, players from Moldova began traveling to international poker competitions, particularly competitions with players from the former republics of the Soviet Union, which are usually held in countries where the citizens of the former Soviet Union can travel to without visas.

The first Russian Poker Tour tournament took place in Saint-Petersburg, Russia, almost seven years ago. The tournament has been held outside of Russia since 2009, after casinos were outlawed in most parts of the country.
There are currently about 1,000 poker players in Moldova, of whom 300 play regularly, and about ten people travel to international tournaments, Furman said. Fedor Zapsha from Chisinau, recently won $120,000 USD (79,000 GBP) in the Russian Poker Tour.

“I know of boys who used to ask for three lei for bus fare, and now they make tens of thousands of dollars per year playing poker,” Furman said.

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