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Czech Republic to Open Lottery Market to Foreign Companies

14 March 2013. Czech Republic will have to open the lottery or betting market to foreign competitors from the European Union. The European Commission criticizes the Czech Lottery Act as discriminatory over a long period as the Act forces the foreign betting companies to set up branches in the Czech Republic. The European Commission refused the arguments of the Czech government definitely.

Historic Roots of the Problem

Since 1 January 2012 the new Czech Lottery Act (the "Act") came into force, which, de facto, prohibits the foreign betting companies to do business in the Czech territory even via the Internet. To conduct the business "legally" they need a license of the Czech Ministry of Finance. However it can be obtained solely by a company that is based in the Czech Republic. And that is the thorn in the eye of the European Commission who considers this provision as discriminatory and in conflict with the Union agreement on free movement of money.

EU-based companies should have equal market conditions. Additionally the Act bans betting of Czech citizens with the foreign companies and also the promotion of the companies. That complicated economic situation of many clubs that had lived from sponsorship and advertisement. Last but not least it affects the lives of the players of more and more popular Poker. However the players and bettors, aware of the Act or not, keep playing and the Czech government loses tax revenues.

What Is Next?

The European Commission refused all arguments of the Czech counter-party (represented by the Ministry of Finance) as insufficient. The Ministry of Finance must prepare a new lottery act by 1 January 2014 as it was ruled by the Czech government on 13 March 2013. Other it will not avoid legal action for breaching the Treaty on the Functioning of the European Union.

The amended lottery act shall enable the foreign betting companies to enter into the Czech market and unify the business environment. The domestic Czech companies complain about a new flat 20% lottery tax that has to be paid apart from the 19% corporate income tax, while the taxation of the foreign companies, based in tax paradises such as Malta, is in single-digit units of per cents only.

We will let ourselves surprise with the amended act and reaction of foreign betting companies. We believe that greater competition and market liberalization will ultimately bring more money to the state budget, but as well as it will improve the conditions of the consumer-bettor.

Resources: Česko má otevřít trh zahraničním sázkovým kancelářím (original Czech article).

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