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The government of Ukraine wants to legalize the gambling business since January 2016. Economists believe that this will bring several billion hryvnias to the budget and allow the entertainment industry to step out of the shadow.

Ukraine needs alternative sources for replenishment of the state budget. Gambling can serve as one of such sources. If it is legalized, it will bring several billion hryvnias. This initiative was offered by the Cabinet of Ministers of Ukraine.

According to its members, this offer can finally bring the gambling business to light. By the way, a certain percentage of funds obtained from its legalization are promised to be spent on some cultural projects, in particular, on the Ukrainian cinema. The corresponding draft law will be probably submitted to the parliament before the end of this year.

In addition, the government submitted three draft laws, which provided the legalization of gambling, to the Verkhovna Rada in December of the last year. However the deputies refused to include them in the agenda. They did not find these draft laws good, so it was decided to establish a task group and develop new draft laws. By the way, all kinds of gambling are allowed in Georgia, whose reforms Ukraine is trying to copy. And this provides enormous revenues. Is Ukraine worse? Of course, no!

Initiative of the Government

That is why the Prime Minister of Ukraine Arseniy Yatsenyuk offers to adopt a law on gambling legalization in the Parliament. The funds, obtained thanks to it, should be used to support cultural projects, in particular, the Ukrainian cinema. The head of government reported about such prospects during a meeting of the Board of the Ministry of Culture of Ukraine at the end of June. The Prime Minister said that he had already organized a meeting concerning this issue with deputies. However they criticized such an initiative. Yatsenyuk believes that the budget will be able to provide funds for the Ukrainian cinema for 2016 in the last quarter of this year, thanks to the legalization of gambling.

Natalie Jaresko, Ukraine’s Minister of Finance, stated:

As soon as I became the Minister of Finance, I immediately brought in a bill that could solve the problem of gambling legalization. Unfortunately, members of parliament did not approve this law. Now we are working on this document. We meet with all the parties in order to submit new effective draft laws. I believe that gambling will have been legalized by 1 January 2016. Currently, we are trying to form a task group that will be headed by the Deputy Minister of Finance Olena Makeyeva. We are taking into account all possible international standards and practices. Now the situation has developed in such a way that the gambling business exists illegally and its representatives don’t bear any responsibility as taxpayers. Thus, we are losing possible revenues that we desperately need. Therefore, the legalization of gambling is our priority. We are also going to make lotteries, casinos, and betting legal. Since this business has not yet stepped out of the shadow, there are no forecasts concerning the funds that may be obtained from gambling.

Aivaras Abromavičius, Ukraine's Minister of Economy and Trade, also supports the gambling business legalization in Ukraine: "I personally support gambling, since it is supposed to bring revenues to the budget. We know that there is an illegal gambling business. However we close our eyes to it.", - the minister said. According to him, the government wants to legalize gambling in the four-star or five-star hotels. The question of legalization of one-armed bandits in the residential districts is not being discussed. Abromavičius believes that the legalized gambling in Ukraine will provide additional revenues thanks to foreigners. "We are talking about tourists, i.e. this is not even related to our compatriots. The foreigners will come, spend their money, and relieve stress." , - the minister added.

Entertainment is Intended for the Rich

The draft law "On Activities of Casinos in Ukraine" (№1,571) can become one of the ways found by the government to save the treasury. In particular, according to the logic of the Prime Minister Arseniy Yatsenyuk, the legalization of gambling, banned 5 years ago, will help to bring to light casinos, one-armed bandits, and other games of chance, which the state cannot (or do not) prohibit. For her part, Natalie Jaresko, Minister of Finance, said that this business was "de facto existing and prosperous."

At the same time, gambling was defined as "an entertainment for the rich" in the explanatory note to this initiative. It must have been done to prevent Ukrainians from being shocked. Indeed, the turnover of each casino must reach sums with eight-nine digits to provide owners with the opportunity to afford to:

  • Annually pay €1,300,000 (established by the law) for each gambling house,
  • Pay for casino equipments,
  • Pay salary to at least 120 employees (this paragraph is present in the license requirements),
  • Earn something for themselves,

However the project has no restrictions for the visitors of gambling houses (except for age).

Unless the owners of five-star hotels, where, in particular, it is allowed to open gambling halls, will want to verify the financial capacities of gamblers (by a proof of employment or a bank account extract?). However according to the business theory, if you cannot earn providing low prices or high quality, try to increase the number of customers.

Therefore, experts believe that hotels will most likely provide only the dress code requirements (in order to not scare away the really wealthy guests). As for the out-of-town casinos, they will regulate customers by purchasing a minimum number of chips.

However if the main problem of gambling was to determine the client's financial capacity, it would not be banned or limited in certain regions all over the world. Even in "the most democratic country in the world", whose citizen used to be the Minister of Finance of Ukraine, there are certain requirements for running this type of business.

Ace Up Your Sleeve

Mikheil Saakashvili, the current Governor of Ukraine's Odessa Oblast, who is supposed to be a major Ukraine’s reform figure, also supports the legalization of gambling. As you can guess, it should become legal in Odessa. He reported about this at the end of July while opening of the oil-extracting complex in Yuzhny port called Allseeds Black Sea.

"I am sure that it is necessary to allow gambling activities in Odessa," - Saakashvili said. According to him, the police provide a crime-sponsored cover to the gambling business in Ukraine. Its legalization in Odessa will increase revenues to the local budget. The governor added:

I don’t gamble, and this entertainment has never been interesting to me. However since there are those who enjoy this pastime, it is necessary to provide them with a legal opportunity. I know that there are underground casinos in Kiev and Odessa. Why we should feed the illegal economy? We should make such activities legal and provide revenues to budget. There is no need to invent anything. For example, Georgia successfully uses gambling to provide the country with profits.

Controlled Gambling

Actually, the Gambling Ban Law, which was adopted six years ago, was not based on the provision of limits to excessive revenues of casino owners. Technically, the aim of the law "On Prohibition of Gambling Business in Ukraine", adopted on May 15,.2009, was to protect citizens from gambling addiction and threats to morals and values. Deputies believed that it would be valid only three months. During this time, the Cabinet of Ministers was supposed to develop a draft law that would define the principles of gambling and determine special gambling zones. Experts predicted that this populism could really force the business into the shadows and cut more than 200,000 jobs.

By the way, this law caused confrontations between the Prime Minister Tymoshenko, who was lobbying the adoption of this law, and President Yushchenko. The President Viktor Yushchenko vetoed the law and commented on the document, indicating substantial losses of the state budget and the inevitable numerous lawsuits for returning payments made in advance for licenses. After all, the authorities issued licenses and permits whose total sum exceeded €30 million. Roughly 400 million hryvnias were earned by taking fees for patents. However one month later a presidential veto was overcome by 390 votes. All parliamentary groups (from Communists to the Yatsenyuk’s Our Ukraine–People's Self-Defense Bloc) supported the gambling ban.

At the moment, Yatsenyuk explains the need to make casino legal by "protection of the population from the harmful effects of uncontrolled and illegal gambling games, as well as a decrease in the number of crimes motivated by receiving funds for gambling" .

What is the difference between the negative influence of legal gambling and the impact of illegal games of chance? How legal casinos will be able to prevent crimes made by addicted gamblers who have a higher number of opportunities to spend obtained money? Probably, it is a question of some kind of psychological discomfort.

It is interesting to note that the aim for prohibiting gambling and the purpose for making casinos legal are supposed to be the same "protection of the population from gambling addiction." However in all the requirements for gambling houses, registered in the project, the aim of "protection" seems to be mentioned only in the need to "take measures to oppose problem gambling." And according to authors of this document, posters with appeals to fight problem gambling will be the most efficient measure. Development of the other protective measures will most likely depend on the imagination of the casino owners. Perhaps they will offer something like Charcot's douche to losers in order to appease them. It will be a bonus for participating. Or they will receive a commemorative chip with the inscription: "You gamble, the budget wins."

Not a Bit of it

The Ukrainian Gambling Business Association emphasizes: according to the law adopted six years ago, the government offers new rules for this industry. But not a bit of it...

"This is the duty of the Cabinet of Ministers! We can say that the Cabinet of Ministers under the leadership of various Prime Ministers over six years has not supported this law!" - Gregory Tripulsky, a vice-president of the Ukrainian Gambling Business Association, said.

It is necessary to choose good locations, in particular, recreational areas and tourist places of interests for the development of the gambling business. However politicians and officials don’t want to determine gambling rules due to the unpopularity of this topic, since those who are involved in the development of this law are blamed for lobbying someone's interests. In this regard, we can mention the case observed in the previous year, when the Prime Minister faced such accusations.

"There was no reason to say that he was lobbying the interests of any structure. Any law is interesting to someone, but you can always find a parliamentary group that starts discussing this topic and stating that this is bad." - Gregory Tripulsky said.

We want to remind you that the gambling ban in Ukraine was catalyzed by a fire in the slot hall of Metro-Jackpot Ltd., which occurred on May 7, 2009 in Dnepropetrovsk. As a result, nine people died, and 11 persons were hospitalized with injuries.

This tragic event was a good PR reason for the popular "struggle for spirituality and morality", but the real economic and social consequences of such a step were interesting neither to the officials nor to the deputies. On the same day, Yulia Tymoshenko, who was the Prime Minister of Ukraine at that time, issued a directive on inspections of gambling houses and suspended the licenses. She also closed all gambling establishments located in residential houses.

The current law "On Prohibition of Gambling Business in Ukraine" bans gambling in casinos, gambling halls, rooms, and bookmakers.

Populism Slows Down the Legalization

Experts on economics emphasize that the gambling ban used to be a big mistake. De facto the gambling industry continues to flourish, but billions of dollars is not taxed and remains in the shadows, enriching only certain individuals.

This law was adopted against the populist background. Now it is necessary to change it, because gambling still exists. However it is illegal and does not bring even a penny to the budget. If it is legalized, the treasury will receive some additional revenues. Thus, the complicated financial situation in Ukraine will be slightly improved. We must move away from populism and work in the civilized way. Abroad gambling is legal and open, - said Andriy Novak, the Chairman of the Ukraine’s Committee of Economists.

According to him, " all types of gambling may exist, except for those that are associated with fist fighting without rules. However the age limits for players and locations of slot machines should be clearly determined. To do this, it is necessary to follow experience of Europe and learn from it".

Thus, the political populism slows down the legalization of gambling. No one wants to bear the responsibility for unpopular decisions when the country is waging war. Gambling seems to be inappropriate at the moment. However as for filling the budget, such steps are necessary, since the state must seek additional sources of revenues. If gambling is fully legalized and controlled, it can bring Ukraine several billion hryvnias of income per year. And this mechanism can be improved. For example, it is possible to choose good places, in particular, recreation areas or tourism destinations.

Budget is Above All

Under the conditions of stagnation, the economic theory recommends that governments should promote and support local businesses. However experts believe that the Ukrainian practice shows the choice of feudal methods: high taxes, sale of licenses, and restrictions on budget spending. And no one analyzes the social impact of innovations.

"Those who do not vote will support the underground gambling business." - the Prime Minister Yatsenyuk declared an irresistible argument. At the same time, experts emphasize that if you continue to adhere to this logic, you may legalize drug trafficking, which is also prosperous in Ukraine, according to the police. And the government will be even able to appeal to the European experience, for example, the Netherlands. It is also possible to recall that prostitution is legal in some European countries (such as Germany, Austria, Hungary, Latvia, and the Netherlands). Finally, there is a black market of firearms, which also brings billions of dollars. They may be considered to be additional sources of funds!

It is no wonder that the declarations of Ukrainian officials would have such sources of income as the huge winnings at casinos, instead of the current incredible royalties for copyright. The experts do not have doubts that such certificates will be available. After all, gambling is often used for money laundering and legalization of income, even in countries with less corrupt police than in Ukraine.

In addition, in order to make this kind of business profitable and bring billions to the budget and casino owners, it is necessary to take the same amount of money from pockets of the others. It is easy to understand that the actual budget will be filled by the funds of the impoverished Ukrainians, who will be motivated by the strong desire to get rich quickly and treat this opportunity as the last chance to survive.

Gambling Requires Strict Rules

Gambling can make some individuals addicted, but this fact should not become an obstacle to its legalization, - said Alexander Zholud’, a senior analyst of the International Centre for Policy Studies.

I believe that all activities should be legalized. Otherwise, illegal gambling can flourish. For example, when the gambling business was banned, underground casinos became popular. To be sure, there are addicted people. If they want to gamble, the prohibition will not be able to stop them. Anyway, they will find a way to satisfy their needs. Therefore, we should rather provide them with the opportunity to gamble at the national level, as opposed to the black market.

Those who suffer from problem gambling should be treated. However this should not lead to the prohibition of roulette or slot machines. Alexander Zholud’ summed up:

The fact that we ban does not mean that they will be unable to use services of illegal casinos. And anyway, they don’t want to be treated. On the one hand, I believe that it is necessary to provide open access to gambling for those who have reached a certain age and are responsible for their own actions. It is also necessary to implement certain social programs that will provide treatment for addicted gamblers, as it is used for patients with alcoholism or drug addiction.

However it is likely that everything will be organized in the standard way: only friends and relatives of the high-ranking authorities will get preferences for carrying out gambling-related activities. It is said that casinos will be legalized exclusively in five-star hotels with at least 250 rooms. Taking into account their tiny number, the budget revenues will be miserable, and the operators will have a monopoly on the market. However the black market will not disappear. Nevertheless, legal casinos will probably appear in Ukraine in 2016.

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