Czech Republic opts for two-tiered tax rate; Fortuna’s turnover up, profits down

czech-republic-betting-fortunaThe Czech Republic’s latest plan to revise its gambling tax regime has recommended a lower tax on sports betting than on casino products.

For some time now, the Czech government has been talking about boosting its blanket 20% tax on all gambling revenue. This week, Czech media outlet Hospodarske Noviny reported that politicians had approved a plan to impose a 23% tax on sports betting and a 28% tax on slots, casino games and lotteries. Land-based slots operators would also pay a daily fee of 110 crowns (US $4.50) per machine, twice the current rate.

The new regime would apply equally to both online and land-based gambling. The Czech Republic hasn’t yet rolled out the welcome mat for international online operators, but the plan is to begin the licensing process when the new regime kicks in next year.

The proposal must still pass a second reading in Parliament, which isn’t expected to happen for a few weeks. The possibility remains that politicians will choose to implement the 25% tax on all forms of gambling originally proposed by the Ministry of Finance.

Hospodarske Noviny said Czech betting operators will have reason to celebrate if the 23% betting rate is chosen. The paper estimates that Saxka would likely save over 80m crowns ($3.3m) next year while Tipsport could keep an extra 40m in its pocket and Fortuna Entertainment Group could save around 30m.

Fortuna could use the help. The company released its H1 earnings report last week, which showed net profit falling 47% to €4.8m in the first six months of 2015. Earnings fell 39% to €9m despite a nearly 24% rise in sports betting turnover as costs rose 10% and betting margins fell on poor sporting results.

Sports betting gross win inched up 1.6% to €63.1m, driven by a 19% rise in online betting to €38.3m, while retail betting fell 17% to €24.8m. Online betting turnover was boosted by the abolishment of an online handling fee in Slovakia, which not so coincidentally was the region in which retail betting posted its biggest decline.

The Czech Republic generated nearly 60% of Fortuna’s total betting turnover, with Slovakia accounting for one-third. Contributions from Fortuna’s Polish operations grew at a double-digit rate, and while online growth eclipsed land-based business, the retail side continues to represent the majority of gross win.

Gross win from Fortuna’s lottery operations was up 8% to €4m, driven by the popularity of scratch cards and a 13% increase in the number of installed lottery terminals.

Fortuna shut down its Malta-based FortunaWin Ltd business in H1. The liquidation process is expected to wrap up before the year is done.

As of Sept. 1, Fortuna welcomed the return of Michal Hanák as its Chief Sportsbook Officer. A Fortuna veteran from years back, Hanák had been working as strategic development director for Slovak sports betting operator Niké.