Islj 2009 3-4 - TMC Asser Instituut

6.4. Compatibility with Article 49 EC Treaty
While Estonian rules on licensing are applicable without distinction
to domestic and foreign providers of gambling services, it remains a
question as to whether the requirement to obtain an activity license
for each category of gambling separately is compatible with the market
access approach. Namely, it is not clear whether foreign service
providers that are legally established in another Member State, and
that already comply with the licensing requirements in their home
state, would be the subject to an activity license only in respect to categories
of gambling that they do not have a license for in their home
state, or to double licensing requirements, i.e., in relation to categories
already licensed at home. Looking at the practice of the Tax and
Customs Board, who has investigated the case of triobet.com and
inquired into the licenses issued by the Isle of Man, it would appear
that the principle of mutual recognition would be respected as far as
the situation where identical activity licenses are issued by the home
states. However, given that the investigation took place at the time the
legislation did not provide the powers to supervisory officials to block
the sites of foreign remote gambling service providers, it does not follow
that the investigation would cease without any results after
January 1, 2010, and entry into force of the provisions of the Act related
to remote gambling. 27 Furthermore, it also remains unclear
whether Estonian legislation requiring separate licenses for different
categories of gambling is justified and proportionate, and whether it
would serve more than financial objectives. The complete lack of consideration
for the control exercised by another Member States would
probably be in contradiction to the basic substance of the economic
freedoms in the internal market, unless justified and proportionate.
This concern has also been voiced by the European Commission in
the course of their review of the proposal for the new Gambling Act.
7. State Supervision and Reporting
Supervision over the organization of gambling is performed by police
officials and Tax and Customs Board officials. An organizer of gambling
must submit a report in electronic form on the organization of
gambling every three months to the Tax and Customs Board. 28 The
Act has made use of the novel possibilities to supervise the organizers
via an electronic calculation and control system. 29 It is an electronic
communication network connecting the gambling machines, or additional
games of chance for organizing other gambling of the organizer
of gambling, with electronic game equipment or game equipment
used for organizing gambling in the form of remote gambling. The
gambling table must be connected with an electronic calculation and
control system, where settlements, or the game, are partially made by
using electronic devices. The electronic calculation and control system
is intended to guarantee registration and recording of information
in a way that enables calculation of the organizer of gambling at
any time , as well as the percents of payments made to players from
the total amount of stakes for every gambling machine, gambling
table connected to the system, and online gambling game. 30 Where
the electronic calculation and control system of the organizer of gambling
and the information system of the Tax and Customs Board are
connected as described above, and in the case of promotional lotteries,
there is no requirement to submit a report on the organization of
gambling. 31
In order to inspect the legality of an organization of gambling,
supervisory officials are entitled to perform on-the-spot inspection of
the organizers of gambling at its location or place of activity. 32 Civil
27 Discussed further below under paragraphs
dedicated to regulation of remote
gambling.
28 Article 57(1) of the Act.
29 The relevant provisions will enter into
force on 1 January 2011 separately from
the rest of the Act.
30 Articles 58(1) and (2) of the Act.
31 Article 57(2) of the Act.
32 For more on the investigative power of
the supervisory officials see Articles 66-
73 of the Act.
33 See Articles 74 - 101 of the Act.
34 Article 2 of the Gambling Tax Act.
35 861 SE Available at web.riigikogu.ee/
ems/plsql/motions.show?assembly=
9&id=861&t=E.
36 According to the Tax and Custom Board
official statistics. See www.emta.ee/
?id=14183.
37 The Estonian Association of Gambling
Operators has an instant calculator on
its website http://www.ehkl.ee visited on
6 April 2009.
and criminal sanctions are prescribed for violations of these provisions
of the Act. 33
8. Taxation under Gambling Tax Act
A gambling tax is paid by organizers of gambling. 34 Article 1 of the
Gambling Tax Act provides that the gambling tax shall be imposed on
amounts received as stakes in games of skill, totalisators, or betting provided
for in the Gambling Act; gambling tables and gambling machines
used for organizing games of chance provided for in the Gambling Act;
amounts received as stakes in games of chance that are not organized on
gambling tables or gambling machines; and, amounts received from the
sale of lottery tickets when lotteries provided for in the Lotteries Act are
organized. The reference to the Lottery Act here is obsolete as it is no
longer in force. Gambling organizers argue that the term “amounts
received as stakes” should be interpreted according to the net principle,
i.e., that the prize money should be subtracted from the amount of
stakes received in order to arrive at the taxable base. However, the
proposition has no support in law, namely, in the explanatory memorandum
to the Gambling Tax Act 35 that provides for the application of
a gross-profit principle, meaning taxation of the amount of stakes without
any such subtractions. This approach aims to avoid a situation
where the entire amount received from a stake is paid out as prize
money and there is no taxable amount left.
The Gambling Tax Act is currently undergoing review to align it
with the new Gambling Act.
The tax period is one calendar month for lotteries and games of
chance or skill. The taxable period for organizing betting or a totalisator
shall be the period during which the betting or totalisator is
organized, starting on the first day set out in the rules of the game for
placing stakes, and ending on the last day set out in the rules of the
game for awarding prizes. Tax declaration (even if it is not a taxable
income) and tax settlement are due by 15th day of calendar month following
tax period.
Specific rates are given in Article 6 of the Gambling Tax Act. The
rate for organizing games of chance is EEK 7.000 per one gambling
machine and EEK 20,000 per one gambling table. The tax rate for
betting is 5%; for totalisator 5%; for a game of skill 18%; 18% for a
game of chance that is not organized on a gambling table or a gambling
machine; 18% for a passive lottery; 18% for an instant lottery;
and, 10% for a numbers lottery. As has already been mentioned, the
sports betting sites offering their services in Estonia, other than
www.spordiennustus.ee, avoid paying these taxes as they are not in
possession of an activity license, and are based in tax havens such as
the Isle of Man and Malta.
Gambling taxes are paid into the state budget. It is the only tax collected
by the Estonian Government which is 100% invested into different
social causes and charitable purposes. Of the amount of the
gambling tax paid into the state budget: 46% is transferred to the
Cultural Endowment of Estonia and 63% of this amount is allocated
for cultural buildings; 3.9% is transferred to the Estonian Red Cross;
12.7% is intended for regional investment aid programme which supports
projects related to children, young people, families, elderly persons
and disabled persons; and 37.4% is allocated for supporting projects
related to sports, science, education, children, young people, families,
medicine, welfare, elderly persons and disabled persons out of
which 31.8% is meant for supporting projects related to science, education,
children and young people, 22% for Olympic preparation
projects, 10% for supporting other sports projects, 32% for projects
related to families, medicine, welfare, elderly persons and disabled
persons, and 4% for supporting cultural projects. The tax is administered
by the Estonian Tax and Customs Board. In 2007, the amount
of tax collected from gambling was EEK 403 million. 36 At this very
moment over EEK 100 million in gambling taxes from casinos alone
has gone to the state budget. 37
9. Advertising of Gambling Services, Premises and Organisers
The new Advertising Act came into force on November 1, 2008. In
comparison to the repelled act, additional restrictions have been
placed on the advertising of alcohol products and financial services,
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