Ukraine lotteries discussed on Channel 5

Channel 5 recently aired a TV programme highlighting the refusal to renew lottery licenses for MSL and patriot... leaving the way open for the "Ukraine National Lottery" - which is private, not owned by the State. Here is a transcript in English:

 

Where one fights to the end, others flourish: how Ukrainian sanctions work

(TV programme, airing on 5th Channel on 22 Nov. 2015)

Host:

People love gambling as much as fighting. Lotteries were fought against for centuries - once forbidden, and then allowed all over again. Years of following down this path created understanding that forbidding gaming is the same as forbidding life.

Each time such bans led to holes in state budgets, and boost of illegal gaming. Europeans understood that professionally organised and transparent market may fund projects that are not covered by state budget or not seen as exciting. London aqueduct, British Museum, Yale, Harvard were built on lottery money.

In Ukraine state bodies still don't understand the importance of regulated lottery market and still step on the rakes as Europe used to some 200 years ago.

Ukraine is still a young country, a pre-schooler. And making mistakes is no shame, so we practice in that, but the Lottery market is being killed, holes in the budget due to unpaid taxes remain unnoticed and illegal on-line gambling flourishes.

In September Ukraine introduced sanctions against selected Russian companies and odious Russians. Experts say such reaction is ‘too little too late’, as the enemy offensive is nearing two years. The sanctions list raises lots of questions as the key wrongdoers were not included in it.

On the 2nd of September the Security Council has adopted a decision "On introducing personal, special economic and other limiting measures (sanctions)". Sanctions list mentions 388 people, but neither the President of Russia nor its Prime Minister are included. The list of legal entities raises even more questions, which includes 105 Russian enterprises. The majority of which don't even work with or in Ukraine. At the same time, data provided by Forbes states that subsidiaries of largest Russian banks, industrial, technological and telecommunication enterprises with Russian capital continue operating unhindered in Ukraine. V. Suslov, ex-minister of economy of Ukraine states: "Those who could suffer from sanctions did not fall under them. Thus I assume that sanctions are the result of the ‘fixed game’."  But the lottery business of Ukraine was included into the list. Two largest operators, MSL and Patriot, were listed as supporters of terrorist groups. "Such pressure of Lottery operators isn't coincidental - states people's deputy Mykola Knyazhytskii - I suspect that Russian lobby in Ukraine instigated this decision". As Russia did not succeed in building its own market and their authorities envy Ukrainian success. MSL and Patriot were the largest payers of military tax, which supports Ukrainian Army.

M.Knyazhytskii:

Some worked partially in the shadow, some kept to the law and it filled the budget. I would like to remind that some of these companies were the biggest military taxpayers and now they're practically destroyed. Who wins? Evidently those, who Ukraine fights against.

Host:

A. Boiko , the head of the supervisory council of the Patriot lottery still cannot understand why Patriot was listed as the ‘enemy of Ukraine’.

A. Boiko:

What was the reason? Terrorism? Terrorists, us? Are we breaking the territorial integrity of Ukraine? No we are not. I don't understand it.

Host:

Sanctions against two lottery operators is another step taken by people in authority to push through their interests on the lottery market - states Boiko. Such fight began in Spring 2014 when Ministry of Finance refused to prolong lottery licenses. In summer a massive information campaign against Patriot and MSL was launched, in which lottery operators were accused of pro-Russian position and supporting terrorists on the East. During autumn and winter police conducted extensive raids, closing shops selling and distributing lotteries, seizing equipment. Later operators won in the court and equipment was returned.

As of January 1, 2015, Ministry of Finance approved amendments to the Tax Code introducing new income and military taxes on winnings. September. Introduction of sanctions against Patriot and MSL.

A. Boiko:

All this mess led to drastic fall of lottery distribution and income.

Host:

Government is still hesitant on the lottery problem - on the one hand Ministry of Finance refuses to comment on this situation, Ministry of Justice openly states that Ministry of Finance fails to fulfil its duties. In official government letter the deputy of Minister of Justice Ihor Alekseyev reminds that according to the laws of Ukraine "On licensing of select types of economic activity" and "On national lotteries" Ministry of Finance was obliged to prolong licenses to all lottery operators, but it didn't.

In 2014 lottery market in Ukraine amounted to 12 billion UAH. In the first quarter of 2015 market showed record-breaking low turnover of a meager 0.5 billion UAH.

A. Boiko:

The decrease is drastic. Mainly because of sanctions against Patriot and MSL. Patriot had 67% of market in 2014, while MSL - around 30%. The rest belonged to UNL (Ukrainian National Lotteries). Patriot and MSL were forced out of the market, leaving UNL only.

Host:

Operators state that sanctions affected the state budget. Last year MSL paid out 20 mln. UAH in taxes on the monthly basis;  currently this monthly amount is only 200 000. The same story about MSL as another member on the sanctions list.

Evolt Limited (owned by Mixalene Holdings Limited together with Guepard Limited) is the owner of the MSL.  Their final beneficiaries are citizens of Cyprus and Ukraine.

A. Uryadov, CEO of MSL:

Sales dropped 4 times compared to last year. The same is true for taxation payments. In 2013 we paid 300 mln UAH in taxes. Today, after 10 months of 2015, this sum equals 124 mln. UAH.

Host:

Officials break records of creativity in their efforts to kill the lottery market - states Uriadov. First - new taxes, that decrease the size of the market. Later sanctions. At the same time lottery operators state that their bank accounts are blocked.

A. Uryadov, CEO of MSL:

MSL accounts are blocked by the order of the National Bank of Ukraine. MSL has no right to use account even to pay taxes.

M.Knyazhytskii:

These sanctions are corrupt and anti-Ukrainian. Because of sanctions some profitable Ukrainian companies, which had nothing in common with Russia and were major payers of military tax were closed. It happened because someone gave a bribe to some official, or maybe someone from another country paid them.

Host:

Experts don't deny that all these actions are aimed at concentrating lottery business of Ukraine in a single pair of hands, as sanctions aimed the biggest lottery operators. Today the market belongs to UNL the smallest operator that avoided sanctions. How their business is going remains a secret as the company refused to give any comments.

In 2014 UNL paid 23 mln UAH in taxes, and Patriot company - around 200 mln UAH.

Redistributing lottery market greatly decreased the income from lotteries; instead we have officials flying all over the world asking for money. Experts say: 2016 budget, its income part, is full of gaping holes while the spending part is bloated.

Andrii Novak, the head of Committee of Economists of Ukraine:

Key threat of 2016 is realistic income part. As the Tax reform is planned and real and radical taxation reforms never bring the planned income during the first years.

Host:

Whether intentionally or not, officials ruin profitable business that provides thousands of jobs. Operators promise to fight, among other things on the issue of the increase of taxation from lottery games.

A. Uriadov, CEO of MSL:

The regulated market has the huge potential, when the rules are clear, there is no corruption, and then many countries show marvellous results. In Australia, for example, the lottery income is on the 5th place in the budget.

Host:

Introduction of sanctions is to advantage of our enemy and lobbies the interests of select companies - experts state. Their real goal is to clean up and then redistribute multimillion lottery markets. But the result is quite opposite now - the remnants of lottery taxes and bloom of illegal internet gaming.

Host:

Don Quixotes in high offices imitate turbulent activity fighting the windmills. They aim at lottery market and almost for a year multiply it by 0. But nature abhors vacuum. You can not forbid an average man to try his luck. If there are no lotteries, the there is internet with a number of foreign games - subscribe and play. They won't care about officials’ disputes.

The lottery ban won't kill the gambling thrill and desire to risk. One may always find alternative. The question is whether it is for the better.

Aleksandr, an active player noticed that his favourite games became hard to pursue.

Aleksandr, the avid player:

I had my favourite place to buy tickets. Now it is almost always closed. The worst is that when it works I can't find the lotteries I like. They are just gone. Lottery tickets have become a deficit product.

Host:

Aleksander likes to try his luck. His family plays as well. They used to play Sportloto in the soviet times, and now they buy popular lotteries. Now they wonder why lotteries became unavailable. If he himself can play on the internet, his parents simply don't know how to use the computer.

Aleksandr, the avid player:

What alternative do we have? Internet offers vast choice. But online games are less personal; you can't hold the ticket in your hands. Variety is great, and I'm just figuring it out right now. But my parents have no possibility to play online.

Host:

Most famous online lotteries belong to other countries, which means online gaming adds to the income of other countries. Unofficial research shows that turnover of uncontrolled online games in the Ukrainian segment sums up to 25 billion UAH.

Aleksandr, the avid player:

The most popular is MegaMillion, it is the most popular one I played. There is also Powerball and some small that I'm not familiar with. I became the fan of MegaMillion.

Host:

The US-based Powerball is the most famous lottery out of America, with jackpots over 40 mln. USD. Megamillion is also among the most popular games, as it holds the jackpot record in the USA - $390 mln. Then there is Euromillion in Europe. It is interesting to know that all western countries hold internet games under strict control. In Ukraine it is Uncontrolled.

People are trying to catch their luck. Internet tells about the winnings of others. And people encouraged by success of others follow in the steps of winners.

Aleksandr, the avid player:

I always envy the winner I have never won sufficient sums. I always feel anxious when I hear that someone has ensured their retirement by playing lotteries.

Host:

Since 2007 Megamillion made 3 Americans rich; they won $390 mln. Hoping to achieve their luck foreigners rushed to buy tickets.

Aleksandr, the avid player:

Sometimes you think the more tickets you buy the more chances you have to win. So when you hear that someone won you buy more and more tickets to win the MegaMillion.

Host:

Money, which could have been used to help the Ukrainian society, flow abroad. Players are sure that officials should have counted how much Ukraine will lose to foreigners before ruining the lottery market in Ukraine.

Great Chinese wall, British aqueduct, museums, Universities were built using lottery income. Here in Ukraine officials want to buy dachas and vacation in Nice using lottery income - the fight for the market picks up.