Cyprus report favours GPT above turnover tax
KPMG study suggests gross profit tax will encourage more operators to apply for Cypriot egaming licences.
A report into potential tax regimes for the Cypriot egaming market has found that a gross profit tax (GPT) system would “maximise the size of the locally regulated market”.
The paper follows a study from KPMG, commissioned by the Remote Gambling Association (RGA), designed to “test the effectiveness” of the proposed 3% turnover tax rate, and sees GPT generating higher tax revenues for the Cypriot government as it would encourage more operators to submit licence applications.
KPMG explained that “GPT will encourage more responsible operators to obtain a licence, a result of which being that more Cypriot customers will be betting within the regulated market and will be subject to the governments social responsibility policies”.
The report also found that “GPT at a single rate can be applied to a wide variety of gambling activities with different payout ratios without distorting competition between them [and] gambling activities with very high payout ratios (such as casinos and online poker) can only be effectively taxed by GPT, thus removing a substantial potential source of future tax revenue if a TT is introduced.”
Cyprus recently revived its plans for egaming legislation, with a bill debated by the Cypriot parliament last week, although the tax question is yet to go before the House Financial Committee. The new developments come after a proposed ban on certain products “ suggested in 2010 “ was met with opposition from the European Commission.
In a blog post for eGaming Review last year, lawyer Olga Georgiades explained that the risk of fines resulting from disobedience of EC advice was “unthinkable for the country and its government given the current economic conditions.”
RGA chief executive Clive Hawkswood said following the release of the report: “The RGA believes that the partial opening of the Cypriot on-line gambling market is a welcome step. However, by proposing a turnover tax regime the Government is creating a huge and uncompetitive financial burden for potential licensees.
“There is no doubt that implementation of current proposals will see the newly regulated market fail, which will be to the detriment of the Cypriot state and consumers,” added Hawkswood.