On 30 June 2016, the Government of the Federation of Bosnia and Herzegovina introduced an emergency bill that, if signed into law, will increase taxation on the land-based betting industry in this political entity.

Under the new legislation, the Government would levy a 10% tax on winnings below BAM 100 (roughly EUR 50), in addition to the 10% currently levied on the winnings of BAM 100 and above, and 5% currently levied on the handle.

Land-based sports and virtual betting is a rare thriving industry in the struggling post-war economy of the Federation, one of the two political entities comprising the Eastern European country of Bosnia and Herzegovina. The Federation has thirteen registered operators running between 1,140 and 1,538 betting shops against a population of roughly 2.5 million – the greatest number of betting shops in Europe per capita. The pervasiveness of betting in the Federation is controversial; ethnic Bosniaks, who comprise 70% of the Federal population, traditionally declare themselves as Muslim – a religion that condemns all forms of gambling.

The primary stated purpose of the proposed legislation is to increase budget revenues.  In the period between January and April 2016, the land-based betting industry has contributed BAM 10,831,000 (over EUR 5.5 million) to the Federal government in tax, not counting health and pension expenses for about 5,500 employees. The proponents of the legislation estimate that the state lost between BAM 20 million – BAM 25 million (over EUR 10 million – EUR 12 million) in this period to tax-exempt small winnings.

The secondary argument, frequently invoked in the press, is the need to cut down on betting shops to reduce opportunities for problem gambling.

Experience, however, shows that the effect of similar legislation on budgets revenues and problem gaming in neighbouring countries has been negative. In Croatia (estimated number of players – 400,000), for example, a law came into force on 1 January 2015 mandating a 10% tax on betting winnings under HRK 750 (EUR 100). According to data obtained from Global Betting and Gambling Consultants (GBGC), a leading expert on global and Eastern European gambling economies, the effect of the legislation was the decrease of the total betting handle by HRK 900 million (over EUR 120 million) in 2015. Previously, the total betting handle had been increasing each year except in 2009 due to recession, the GBGC data indicates.

As a result, betting shops in Croatia contributed HRK 30 million (over EUR 4 million) in tax less in 2015 than in the previous year, as reported by the Croatian Bookmaking Association. It is, therefore, reasonable to expect that, far from doubling budget revenues from gambling, the proposed legislation in the Federation might cost the budget nearly an entire quarterly yield.

Another effect has been an increase in visits to foreign betting websites. If the aim is to curb betting, online betting is a potential problem for the Federal lawmakers. In 2013, the Federal Government had already tried – unsuccessfully – banning foreign betting providers on the ISP (internet service provider) level. Amidst technical challenges and the public outcry, the proposal failed. Currently, there are dozens of betting sites accepting and incentivizing Bosnian players, and localized to Bosniak (or Serbian or Croatian, which share near 100% mutual intelligibility with Bosniak), including Bet365, Bet-at-Home, Betfair, William Hill, Unibet, Paddy Power and 888Sport. While low credit card adoption and a perception of the brick-and-mortar betting shop as a social space have kept online betting low in the Federation, the additional tax on small winnings under the proposed legislation might drive more Bosnian custom to betting sites, especially given the convenience of payment options such as Reiffeissen PrePaid Card and the Neteller e-wallet service, both available to users in Bosnia and Herzegovina.

About the researchers

Tibor Simić, Inovativni trendovi d. o. o.

Inovativni trendovi d.o.o. (http://www.inovatrend.com/?lang=eng ) is an IT company focused on the development, implementation and maintenance of program solutions for the expansion of telecommunication infrastructure, as well as for “business mobilisation”, providing corporations with distributed, mobile business. The company’s technical expertise combines signal telecommunication protocols, such as ss7 and sigtran, with modern web and mobile program solutions. Its special area of interest includes custom distributed solutions for virtual betting and sports betting.

Global Betting and Gaming Consultants (GBGC) is a specialist gambling consultancy that was established by its Chief Executive Warwick Bartlett in 1999. GBGC’s directors have more than 50 years’ combined experience in the gambling industry. In completing its consultancy projects GBGC brings a combination of operational and financial experience, a gambling industry focus and an extensive network of contacts. The company’s Zagreb office contributes specialist, regional knowledge on Eastern European markets.