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By Michal Jeziorski
A Finance Ministry proposal to amend Poland's gambling law has raised an outcry among slot-machine operators.
The draft seeks to increase taxes levied on slot machine owners and establishments offering gaming services. Industry insiders say this may hinder the growth of the market or even cause it to decline. As a result, they say, gambling may begin to flourish in the off-the-books sector of the economy controlled by the criminal underworld.
Most criticism concerns the proposed 44-percent increase of tax on low-payout machines. A report by the Gdańsk Institute for Market Economics (IBnGR) shows that an increase in tax from 125 to 180 euros per machine would drive around 8 percent of the slot machines off the market, making them unprofitable. In addition, in 2007 and 2008, the growth of the slot machine market would decelerate from 8 to 3 percent.
What is more, government revenue will only go up in a short initial period after the higher tax takes effect, says the IBnGR's expert Bohdan Wyżnikiewicz. "After around 18 months, the revenues will drop below what they would have been had the tax remained the same," Wyżnikiewicz said. He added that government revenues from personal and corporate income taxes as well as value-added tax paid by slot machine operators and owners of establishments where slot machines are available would decline by around zl.14 million in the first three months after the tax increase. Within 18 months of the hike, the gap in government revenue would be up to zl.40 million per quarter. "The overall effect for the budget would be clearly negative," Wyżnikiewicz said.
Wyżnikiewicz is also skeptical about a planned 10-percent "surcharge" on businesses providing gambling services. "The fee would stamp out the present legal market for gambling," he says. "For limited-payout slot machines, the combined sum of the proposed gaming tax and the surcharge would exceed the profit these machines generate."
Gaming services in Poland are less profitable than in many other countries, slot machine operators say. According to Finance Ministry data, in 2005, the profitability of casinos was only 1.2 percent. The corresponding figure for video game arcades was 4.5 percent, while pari-mutuel betting showed 0.9 percent profitability, and low-payout slot-machine operators reported 3.8 percent.
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