Gambling legalisation in Kyrgyzstan. An analysis of the Bill.
A package of bills legalising gambling in Kyrgyzstan was proposed by the country’s ministry of Economy. The 4H agency can’t miss this news.
What verticals are supposed to be legalised? Casinos, slot machines, computer simulators, interactive facilities (probably bookmakers), e-casinos. As you can see, online operation is implied.
What are the taxes? The Ministry of Economy proposes to charge operators 5% of GGR (Gross Gaming Revenue) without paying other taxes. It is also necessary to have a "reserve fund", the size of which depends on the location of the institution.
Who will regulate gambling? The documents do not directly mention this - there is a mention of the "authorised state body".
How long is the licence valid and how much will it cost? It is proposed that the licence will be valid for 10 years. The cost isn't mentioned in the documents.
What are the advertising restrictions? In the case of advertising, the bill proposes to lift the ban on gambling advertising, as this industry becomes regulated. No other special restrictions are implied. So, the general provisions of advertising legislation will apply to the gambling business without any special restrictions.
What else do we need to know? Only foreigners who are over 21 years old can be clients of the gambling operators. That is, the citizens of Kyrgyzstan (just over 6.5 million people) can’t gamble at all.
What the bill contains
The CIS countries one by one compete to make their gambling law more similar to the Russian one. Kyrgyzstan is not an exception. The bill, in terms of a set of definitions (I would even say, exactly repeated wordings), took some provisions from Russian legislation, and some from the legislation of Kazakhstan.
In the case of Russia, the requirements for the gambling zone of a gambling facility were taken in a rather mirror image (for example, division into zones, mandatory alarm button, and so on). At the same time, the presence of the terms "online casino" and "e-casino" immediately moves us towards Kazakhstan, where the law directly prohibits these verticals.
However, based on the Kyrgyzstan bill, it is clear that these verticals are included in the regulation perimeter, but it is not entirely clear how it is possible, given that such definitions are no longer used in documents, except for the definitions section.
For this and other reasons, the bill doesn't seem to be fully developed. First of all, there is an impression that most of the provisions of the bill regulate the land-based gambling business, practically without regulating the features of online operations.
In particular, this can be seen by the obligation of a potential licensee to include the location of a gambling facility when applying for a licence. In other words, even if a licensee wants to start an online operation, this company will also be required to create a land-based betting shop.
It is also not entirely clear whether different types of licences will be issued for different verticals. Based on the bill, which amends the legislation on licensing activities, it seems that the licence will be unified.
Further, it should be noted that the authors of the bill made an attempt to implement some elements of responsible gambling tools, for example, a ban on gambling with credit. Such provisions can indeed be called a breakthrough in the territory of the former USSR countries. At the same time, there is no such basic instruments for responsible gambling such as self exclusion (which exists in the Russian Federation and Kazakhstan).
What is missing from the bill?
A lawyer can always write a lot of text which is understandable only to the people of this occupation, so I will try to limit myself to key themes.
As I mentioned before, the bill is extremely focused on the regulation of the land-based gambling business and practically doesn’t reflect the features of online operations. In addition, provisions that have already proved ineffective in other markets (for example, alarm button, security staff) as mandatory requirements for the licensee do not inspire much confidence.
Like most legislation from the CIS countries, the draft law deals very superficially with the instruments of responsible gambling.
Next, the provisions on advertising. The bill implies that the advertising ban will be lifted, which is logical, since this activity becomes permitted. However, I did not find any requirements for advertising, which, in my opinion, is not the right solution - look at the example of Georgia and Armenia.
Separately, it is worth discussing the provision that the citizens of Kyrgyzstan do not have the right to participate in gambling. Apparently, it is dictated by the desire of the state to start receiving some taxes and revenues from operators, but at the same time to protect the local population from the "evil" gambling business. Such a move could reduce negative connotations among the local community, which would significantly increase the likelihood of acceptance.
However, it seems that such a regulatory scheme may not achieve its original purpose, as the number of foreigners who want to play in Kyrgyzstan may be insignificant. In any case, it will be interesting to watch this piece of history in the making and it will be nice to be wrong in these forecasts, if the Central Asian Las Vegas appears in Kyrgyzstan!
A five percent tax for operators is perhaps one of the few provisions that has caused a pleasant surprise. This is one of the lowest tax rates among countries with a developed system of gambling regulation.
However, this is not even the most surprising. The gambling tax immediately replaces the standard income tax, VAT and sales tax. This approach is extremely inconsistent with the generally accepted consensus that the gambling business should be levied with as many different types of taxes as possible.
Cheap entry to the market and good taxation are clear signs that the desire of operators to enter this market (along with almost no technical requirements) will be increased. Perhaps this was a compromise given the restrictions on the gambling business for the citizens of Kyrgyzstan.
When evaluating what royalties are reasonable to set, there are always many factors to take into account: taxes, market transparency, economic capacity of the market, and others. Undoubtedly, with low taxes, it is logical to set high licence fees in order to increase the government's income from the legalisation of the gambling business accordingly. At the same time, it is important to understand that this logic works if the gambling market is open to everyone, and not just to foreigners.
In this regard, I believe that large royalties, given the regulatory structure proposed by the bill, will be very serious barriers to entry into the market. As for the size itself, it seems that the licence fee should be some average cost of a public service (for example, like for issuing a passport).
The bill also provides for a relatively low "reserve fund" - in the capital of Kyrgyzstan, Bishkek, for a betting company, it will be about $11,000 dollars. Since the market will be quite closed if we speak about customers, then the obligations of operators to customers will be significantly less. But conceptually, the size is really small - for example, in France, the operator is obliged to maintain such a size of the "reserve fund", which corresponds to much larger accepted rates. And relatively speaking, the operator does not have the right to accept bets if their size exceeds the "reserve fund".
Prospects of the Kyrgyz market
The current situation in the country is certainly characterised by a large volume of offshore operators and the presence of illegal offers on land, since otherwise the state would not be looking towards legalisation.
At the same time, if, after all, online operations are not prohibited, and only foreigners can be accepted, Kyrgyzstan, with the support of payment systems, has some chance of becoming the new Curaçao due to some inaccuracy of certain wordings.