Montenegro’s government has introduced a proposal to impose a 15% tax on gambling winnings, as part of a broader fiscal strategy aimed at offsetting significant budgetary shortfalls. The proposed tax, which is expected to generate an additional €5 million annually for the state budget, is outlined in the draft amendments to the personal income tax law. However, the move has triggered alarm among gambling operators in the country, who warn that the tax could have severe consequences for the industry and state revenue.

Gambling Operators Warn of Revenue Decline

The Gambling Operators’ Association, affiliated with Montenegro’s Chamber of Commerce, has raised serious concerns about the proposed tax in discussions with the Ministry of Finance. They argue that similar taxes in other countries have led to substantial drops in payments from licensed operators, estimating a potential 30% decline in Montenegro. This, they claim, would reduce the state’s income from gaming fees, effectively negating the anticipated gains from the new tax. They have urged the government to reconsider the proposal, fearing it will push players towards unlicensed, black-market alternatives where winnings are not taxed.

A Troubled History with Gambling Taxation

This is not the first time Montenegro has attempted to tax gambling winnings. In December 2014, the Montenegrin Parliament approved a similar measure, set to take effect in January 2015. However, due to the Ministry of Finance’s failure to implement necessary regulations, the tax was never enforced. The law was repealed in December 2015 following significant public opposition, including a petition with 18,000 signatures—one of the largest in the country’s history. Now, nine years later, the government is attempting to reintroduce the tax, which would apply to all gambling winnings, calculated as the difference between the wager and the payout. Gambling operators would be responsible for calculating and withholding the tax, submitting it to the authorities by the next working day.

The proposed tax is part of a broader package of measures designed to address an estimated €280 million shortfall from planned reductions in pension contributions. Despite the fiscal pressures, the Gambling Operators’ Association believes that the proposed tax will ultimately do more harm than good, by driving players to untaxed and unregulated platforms, thereby reducing overall state revenue from the gambling sector.

Technical Challenges and Legal Conflicts

The Association has also highlighted significant technical and legal issues with the proposed tax. They point out that the new tax law conflicts with the existing Gambling Act, particularly in how “winnings” and “wagering” are defined and calculated. Different forms of gambling—such as casinos, slot machines, betting shops, and lotteries—treat wagers differently, complicating the tax’s implementation. Without clear definitions and consistent application, the Association warns that the tax could create confusion and compliance challenges.

Comparisons with Regional and EU Practices

Montenegro is not alone in considering a tax on gambling winnings. In neighboring countries like Croatia and the Federation of Bosnia and Herzegovina, similar taxes have been in place for over a decade, though with mixed results. In Croatia, small winnings under €100 are exempt, while in the Federation, winnings under 100 marks (€50.5) are also exempt. Both jurisdictions have seen declines in gambling revenue following the introduction of these taxes, with some operators losing players to untaxed online platforms.

The EU does not enforce a standardized approach to gambling taxation, leaving member states to establish their own regulations. This has resulted in significant variations in tax rates and coverage across Europe. For example, Croatia applies varying tax rates on lottery and betting winnings, ranging from 10% to 30%, depending on the amount.

Public Opposition and Petition Campaign

In response to the proposed tax, a petition campaign has been launched by the Montenegro Bet Association, which represents several of the country’s gambling operators. The petition, published in Vijesti, calls on players to oppose the 15% tax on winnings, arguing that it constitutes “a tax on a tax” and conflicts with both Montenegrin and EU law. The campaign aims to collect at least 6,000 signatures to submit a proposal to the Montenegrin Assembly to amend the law. The petition emphasizes the potential closure of Montenegro’s legal gambling industry and the loss of 3,000 jobs if the tax is implemented as proposed.

Source:

“Montenegro Government Proposes 15% Tax on Gambling Winnings as Industry Reacts.”, montenegrobusiness.eu, August 18, 2024.

The post Montenegro’s Gambling Winnings Tax Proposal Faces Strong Opposition appeared first on Keno Wizard.