Armenia’s Proposed Gambling Tax Hike: a Necessary Measure Or a Step Too Far?

Following the rich tradition of governments targeting profitable sectors as an as-yet-untapped cash cow, Armenia is now eyeing up online gambling. A new draft law, tabled by Civil Contract MP Hayk Sargsyan, advocates a wholesale overhauling of tax on the industry. His fix? An extra 10% turnover levy on online gaming, in addition to existing taxes, with the clear aim of reining in the sector's rapid expansion. The Standing Committee on Economic Affairs has already given the proposal its initial endorsement, but not without dissent. The argument now developing in Armenian politics is not merely a matter of taxation; it's about the destiny of an industry that has, in many ways, grown beyond the reach of regulatory oversight.

Sargsyan, never subtle, has drawn attention to the dizzying trajectory of the growth of gambling in Armenia over the past decade. Betting volumes, he observes, have ballooned 440 times since 2010. But the government's take of the spoils has risen a paltry 26 times in the same period. The statistics, at first glance, show an industry that has had runaway success while returning relatively little to the public coffers. So the MP's solution: if gambling turnover remains unchanged, his proposed tax would add another AMD 100bn (€241.9m) annually to the state budget—money that in theory could be spent on subsidizing social programs, roads, or any range of public services.

According to Zamsino, Armenia is not unique in looking again at how it regulates and taxes gambling. Governments right across Europe are increasingly examining the industry, weighing up the economic contributions it makes against issues of problem gambling and financial openness. The Armenian draft has met mixed responses—not least from within government itself. The nation's Ministry of Finance, for example, has been lukewarm about the proposal.

Opposition from Within

Though Sargsyan has had some backing within his parliamentary faction, the Finance Ministry is wary and its concerns go very deep. Even the deputy finance minister has weighed in, arguing that more taxation of the same kind is not required, and any further 10% turnover tax is too much, and perhaps a mistake. The ministry is insistent: adding further taxes to the gambling sector could easily cause operators to head for the exits in Armenia or worse still, drive them toward unlicensed, offshore offerings.

There is also the issue of enforcement, as a pragmatic matter. Internet gambling, by its very nature, is not a stationary business. Operators can quite readily shift their points of operation, and the players themselves are hardly restricted by national borders in terms of placing a bet. If over-taxed, there is every chance that businesses and consumers alike will simply go elsewhere, taking their money with them.

But Sargsyan is not dismayed. He insists that previous parliamentary efforts at tightening controls over gambling have fallen short, and more needs to be done—above all financially. His argument, essentially, is that while there have been legislations in place to curb the extent of the industry, gambling operators somehow have been able to thrive nevertheless, while the government has not availed itself of their revenues.

The Wider Context: a Balancing Act

Armenia's debate over taxation of gambling is not an isolated phenomenon. Other countries have shared, and do share, comparable difficulties. In some European countries, like Germany and the Netherlands, excessively burdensome regulation has driven much of the gambling action underground. When tax rates are deemed too great or licensing terms too burdensome, a secondary market will be formed, one that is unregulated by governments and consumer safeguards.

At the heart of this argument is a basic one: what role does government have in regulating gambling? For one, the company should be as any other—taxed adequately but not overcharged, regulated adequately to protect customers but not barred from actually conducting business. But for another, gambling is a company which needs much more government involvement, not just in terms of finances but morals.

The Armenian debate is, nonetheless, not a simple matter of money. It is one of regulation, control, and to what extent a government needs to become involved in an expanding but controversial industry. The pushback of the Ministry of Finance suggests that there are not everyone who believes Sargsyan's proposal is the way forward, and the coming months will be bitterly argued about the balance of economic gain and limiting of the industry.

What Comes Next?

Up to now, the plan has been discussed and agreed upon at the committee level, but the war is not won yet. The committee's deputy chair, Babken Tunyan, already suggested waiting at least two months to listen to further debate and to receive comments from the government. This stand is a testament to the ongoing reservations—while some MPs are keen to push through the tax, others appear afraid of unintended consequences.

It is worth noting that even if the tax hike is passed, its effectiveness remains questionable. Will it really bring in the anticipated revenue, or will it simply push the industry into more shadowy sectors of the market? Will foreign operators be prepared to stay in Armenia under stricter fiscal controls, or will they take their business elsewhere?

Regardless of the result, the issue is not going to disappear anytime soon. The evolution of the online gambling market in Armenia—and, for that matter, worldwide—means that governments will continue to grapple with how to control it. Sargsyan and his people have made their case for the time being, but whether it will become law remains to be seen.

One thing, however, is certain: Armenia's gaming industry is under the spotlight, and where there is light, there is sure to be change.