Focus REPORT: GEORGIA
It stipulated that lotteries and other prize winning games could be conducted by legal entities whilst licensing was controlled under the Ministry of Finance and no less than 35 per cent of their income was paid to the state budget in the form of taxes.
It was a weak and somewhat flawed system and in 1993 a law ‘On Enterprise Income Taxes’ determined a 70 per cent tax rate on income from casinos, gaming salons and other gaming business.
As the industry developed in 1996 the Ministry added various other games to the list. In 1997 a Tax Code became an important step in this field and stamped out illegal operations and set the tax rates for the business. This has remained pretty much unchanged and today the tax rates are as follows:
tax rates: 1. Casinos gaming tables – GEL5,000- 10,000 per month
2. Slot machines – GEL50-200 per month
3. Totalisator/bingo/lotto cash desk – GEL300-600 per month
4. Incentive lottery – 10 per cent of the prize fund
5. Lotteries – not more than 20 per cent of proceeds from sale of tickets.
– GEL5m (approx US$3m)
6. Systemic electronic game – GEL2,000- 10,000 per month
In 1999 a decree was issued on ‘Rules of Conduct and Licensing of Lotteries, Casinos, Gambling and Other Winning Games’ which gave a clear definition on such gaming games. Then in 2005 came the Law on Lotteries, gambling and other Winning Games which saw high licensing fees introduced which basically saw an end to small time casinos with many closing down.
licensing fees: 1. Conduct of incentive lottery, lotto and bingo – GEL15,000
2. Operation of bingo – GEL15,000
3. Operation of a gaming salon – GEL20,000 (Tbilisi, Rustavi, Kutaisi, Poti and Batumi). In any other territory the fee is GEL12,000.
4. Operation of betting shop – GEL30,000 (Tbilisi, Rustavi, Kutaisi, Poti and Batumi). In any other territory the fee is GEL20,000.
5. The operation of casinos (throughout Georgia, with the exception of Batumi)
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6. Operation of a casino within territory of Batumi and in municipalities of Kobuleti and Borjomi – GEL250,000. (this was originally GEL1m but amended in 2006). Newly built hotels with more than 100 rooms in Batumi, Anaklia, Kobuleti and Khelvachauri are exempt for a 10 year period.
In respect to point number five, in November 2009 the Georgian parliament agreed to an amendment in legislation which has given hotels in Batumi with more than 100 rooms an exemption for 10 years from the annual licence fee.
This was part of a plan to boost development in Batumi. Georgia amended its legislation to help develop Batumi, which several years ago underwent a transition from a rather dishevelled port town to an exclusive holiday resort. Today it is a popular and thriving resort with a population of around 200,000.
President Saakashvili has lavished attention on Batumi where 35 hotels have gone up in the last four years.
Konstantine Eristavi of Getsadze & Pateishvili Law Office in Georgia said:
Due to the demand of visitors in the past two years three major
international hotel operators have entered the
Georgian market to develop new resort complexes. Batumi now has over 90 gambling
businesses which are primarily slot machine halls or
tote shops. There are three hotel casinos.
“The aim of these amendments was the development of gambling as an extremely profitable business in provincial towns.
“It is true that international practice illustrated that in the towns where a large number of gambling houses operate other types of business cope with considerable problems and there is a big bankruptcy percentage in these towns. Nonetheless in our case, opening of gambling houses in these types of provincial towns was followed by the improvement of infrastructure and social level owing to the tourists and players coming from other parts of the country.”
Due to the demand of visitors in the past two years three major international hotel operators have entered the Georgian market to develop new resort complexes. Batumi now has over 90 gambling businesses which are primarily slot machine halls or tote shops. There are three hotel casinos.
Meanwhile, with high licensing fees for casinos, it has proved difficult for some casinos to break into the market whilst many have closed. Casino Grand Sakartvelo in Tbilisi closed recently leaving just two casinos in the city. Some say this has left the market open to only
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