The state monopoly on gambling in the Republic of Moldova was introduced to combat uncontrolled activities in this area, to reduce the antisocial influence of the industry, to protect minors, to combat tax evasion and to increase budget revenues.
To achieve these goals, the state, represented by the "National Lottery of Moldova", attracted private foreign partners with rich experience and a good reputation. Within the framework of the public-private partnership project, the state has assumed a number of obligations, including stable legislation in the field of gambling and the fight against illegal bookmakers.
The project has brought tangible financial results. Thus, revenues to the state budget due to the activities of the "National Lottery of Moldova" increased from 460 thousand lei in 2012 to 65.5 million lei (!) in 2021. The state-owned enterprise "National Lottery of Moldova" showed the best dynamics of sales revenue in comparison with other state-owned enterprises (2016-2021).
These financial indicators largely reflect the recaptured market from illegal offshore companies. However, the potential of state revenues from this area is much greater.
After all, every year Moldavian players transfer hundreds of millions of lei to offshore sites only through online payment systems, and in 2020 this figure exceeded half a billion lei (!). These amounts do not include transfers via bank cards, which means the final figures are significantly higher.
The increase in state revenues from gambling is directly proportional to the efforts of regulatory authorities in the fight against illegal bookmakers. This was especially evident in 2021. That was the first time the Republic of Moldova started blocking access to unauthorized gambling sites. In parallel, payment system operators began to restrict payments to such sites. As a result of the measures taken, the amounts received by the organizers of illegal online lotteries and sports betting decreased to 155.5 million lei (online payment systems only). At the same time, 536 million lei were transferred to the only state website in this way.
Nevertheless, contrary to its obligations, the state periodically changes the taxation of gambling winnings and laws in this area, which creates an advantage for offshore companies. And the latest changes (from January 2022), according to which the tax on winnings increased by 50%, and gambling advertising and sponsorship were completely banned, jeopardized all previous efforts of the state in this area. The number of players on illegal online gambling sites has increased by 66% in just 4 months and continues to grow. These are mainly Russian offshore companies.
Illegal offshore gambling companies:
- do not pay taxes to the state budget of Moldova
- do not withhold tax on winnings
- allow minors
- do not verify the identity and source of origin of players' funds
- are not responsible in front of the players
- ignore the ban on advertising
- use any means of promotion
- do not direct their income to culture, education, sports and other socially significant goals
The experience of European countries shows that the introduction of restrictions for legitimate gambling businesses can be an advantage for the shadow sector. Therefore, such actions on the part of the State should be based on an analysis of risks and consequences. As our research has shown, in the course of changing the legislation and taxation of gambling, not only did they not conduct analyses, but also ignored the recommendations of relevant government agencies. For example, the Ministry of Finance.
Moreover, the author of the latest amendments to the Law on the Organization of Gambling argued that the main goal is to reduce addiction. However, the draft law was not supported by facts proving the existence and level of this phenomenon in Moldova. And the first-of-its-kind opinion poll conducted by our order in a reputable company (after the amended law came into force) did not reveal critical indicators.
There were no programs proposed to prevent and combat addiction (following the example of European countries), as well as the targeted use of gambling income in socially important areas: culture, education, sports. As a result, there were no fewer players, they just started switching to illegal sites.
In this regard, we consider it appropriate to review the restrictions for the state-owned enterprise "National Lottery of Moldova" and strengthen the fight against the shadow market. The proceeds from the activities of the state-owned enterprise should be directed, among other things, to the development of socially important areas and solving problems of gambling addiction, if they are detected.
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