Romania doubles down on online tax

Over the festive break, the Romanian government introduced a series of new taxes and financial caps aimed at improving the welfare of Romanian citizens, targeting areas including banking, retail, alcohol, tobacco and local infrastructure.

Among the new taxes introduced was a 2% tax on egaming operator turnover, which will now be paid by operators in addition to the 16% tax on gross gaming revenue currently being paid, meaning that operators will now pay a total tax of 18% from 2019.

It was a somewhat pyrrhic victory for Romanian operators, who had successfully lobbied for this to be reduced from a more punitive taxation rate of 5%, but questions will remain about the possible impact of this additional tax on the countries 22 licensed operators.

Ana Maria-Baciu of law firm Nestor Nestor Diculescu Kingston Petersen assesses the decision and the implications for online operators looking to expand their operations into the Romanian market.

EGR Compliance: The widely publicised objective of this taxation has been to plug gaps in the public finances, improving social welfare, but how has the industry lobbied against these measures?

Ana Maria-Baciu (AMB): The timing between the moment when the ruling party has announced the intention to introduce new taxes and the moment when the taxes were approved by the Government was really tight (we are talking days). However, we understand that the trade associations have had several meetings with persons involved in the decision-making process, trying to explain how different type of taxes would affect the industry.

EGR Compliance: In your opinion does the climbdown to 2% from 10% represent a victory for operators?

AMB: While the initial proposal was 10%, it was followed closely by another proposal – 3% for land based and 5% for online. In the end, it was approved at 2%, only for online, together with the increase in the authorization tax for land-based slot machines from 2,600 Euros to 3,600 Euros. So yes, I would say it is a victory. Not just for the operators, but for the industry, and, in the end, for Romania but only if we manage to keep the operators we have interested in this market.

EGR Compliance: Why do you think the government targeted online operators specifically with the tax rise?

AMB: The bill the Government issued at the end of 2018 targeted a lot of other important industries and sectors, such as banking, oil & gas or pensions. So, gambling was just one of them, and not the main target in this tax rise.

EGR Compliance: In the wake of the decision, what are Romanian operators going to do about the changes?

AMB: It seems that on the 10th January, there will be a meeting of the Consultative Council (a consultative body formed of the representatives of the trade association in the gambling field functioning near the National Office for Gambling) organised with the National Office for Gambling, convened mainly in order to discuss with the regulator the new legislation regarding the tax on online gambling. Most probably the industry will have a better sense of what the future is going to look like after this meeting.