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Economics of Gambling in Latvia

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Gaming in Latvia grew rapidly following independence in the early 1990s. Work on legislative acts for regulating lotteries as well as gambling organisation, supervision and control began in 1993. Since 1994, there has been strong state supervision established over gaming businesses in the Republic of Latvia. Arrangement of games of chance are permitted only when a special permission (license), in compliance with provisions stipulated by the law “On Gambling and Lotteries” is granted. A license can be issued only to companies incorporated with the Register of Enterprises of the Republic of Latvia.

The following games of chance are permitted in the Republic of Latvia:

  • operations of the gambling slot-machines;
    • activities of casinos (roulettes and card-tables);
    • totalisator and betting;
    • bingo;
    • telephone games;
    • lotteries;
    • Internet games of chance.

Specific restrictions concerning arrangement of the games of chance are also provided by the law “On Gambling and Lotteries” (Section 21):

  • participation in the games of chance is not allowed for persons younger than 18;
    • games of chance must not be arranged in post or bank offices, in locations where mass culture activities are held, in the buildings of medical and educational institutions, government offices, in churches and cult buildings;
    • games of chance must not be arranged in shops and markets, railway stations, airports, ports, unless having specially confined premises;
    • arrangement of games of chance and lotteries is prohibited without regulations specifically approved by the Lotteries and Gambling Supervision Inspection;
    • total prize value for lotteries and for a game of chance over the telephone must be no less than 45% from the sum total of ticket sales; the sum total of totalisator, betting and bingo prizes must be no less than 50% from the sum total of stakes being paid-in; and slot-machine prizes must be no less than 80% from the sum total of payments.

In addition, local governments are able to define areas where arrangement of games of chance shall be prohibited.

Lotteries and Gambling Supervision Inspection is an institution of direct administration under supervision of the Ministry of Finance that is responsible for the supervision of the arrangement of draws, gambling and lotteries of goods and services.

Under provisions of the law “On Gambling and Lotteries” the Inspection is able to apply pecuniary penalties for the established violations of laws and regulations, in an amount defined by the Code of Administrative Offences, to suspend operations of a company or branches thereof until the violation is eliminated, to refuse the granting of licenses or reregistration thereof, as well as to cancel the license for the arrangement of lotteries or games of chance.

The games of chance are very popular in Latvia (12,800 gambling devices for 2.35 million inhabitants), but there has recently been a public backlash linked to a belief that increased availability of gambling has led to an increase in the numbers of gambling addicts. Therefore, government is considering a reduction of the gambling market by specifying both territorial restrictions and a significant increase in gambling taxation rates. In 2005, It was anticipated that these concepts would be accepted in the Cabinet of Ministers, and the new requirements might become partially effective in 2006.

There are difficulties in providing accurate forecasts in regard to development trends for the next five years. However, it is believed that the market scope will be reduced, since higher requirements with respect to the location of game-halls, size of casinos, and technical requirements for gambling slot-machines will be specified constituting a basis for a large number of older gambling slot-machines that would be unable to meet the quality requirements and would therefore be removed from the market.

The total number of participants of the gambling market has remained relatively unchanged during the last five years. However, two companies have left the market, having become insolvent.

Number of Gambling and Lottery Operators and Gaming Places in Latvia (2000 – 2004):

  • Year >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
  • Companies organizing gambling * >>> 22 >>> 21 >>> 21 >>> 21 >>> 19
  • * slot machines >>> 21 >>> 20 >>> 20 >>> 20 >>> 18
  • * casinos >>> 7 >>> 7 >>> 7 >>> 8 >>> 8
  • * bingo >>> 1 >>> 1 >>> 2 >>> 2 >>> 2
  • * betting >>> 1 >>> 1 >>> 1 >>> 1 >>> 1
  • * phone games >>> – >>> – >>> 1 >>> 1 >>> 1
  • Lottery companies >>> 1 >>> 1 >>> 1 >>> 1 >>> 1
  • Number of slot machines >>> 11,459 >>> 11,843 >>> 9,904 >>> 11,218 >>> 12,668
  • Number of roulette games >>> 27 >>> 27 >>> 31 >>> 29 >>> 28
  • Number of card tables >>> 96 >>> 107 >>> 113 >>> 119 >>> 110
  • Number of gaming halls >>> 172 >>> 181 >>> 381 >>> 499 >>> 616
  • Number of casinos >>> 22 >>> 22 >>> 21 >>> 18 >>> 15

*license for different types of games of chance may be received by one operator.

Source: Submission to the Enquiry from Lottery and Gambling Supervisory Inspection

Gaming machines account for by far the largest segment of the gambling industry in Latvia. In 2004 their presence in the total gambling market exceeded 80%, with GGR of €75.4 million. The dominance of machine in the market is clearly seen from the graph below.

Gross Gaming Revenue (mill. EUR)

Latvia1

Source: Submission to the Enquiry from Lottery and Gambling Supervisory Inspection

Gross Gaming Revenue (€ millions) and market share (%)

  • Year >>> 2000 >>> % >>> 2001 >>> % >>> 2002 >>> % >>> 2003 >>> % >>> 2004 >>> %
  • i. Lotteries >>> 2,909 >>> 6.8 >>> 3,244 >>> 6.9 >>> 3,523 >>> 6.8 >>> 4,159 >>> 6.2 >>> 5,170 >>> 5.5
  • ii. Casino >>> 4,013 >>> 9.5 >>> 4,195 >>> 9.1 >>> 4,913 >>> 9.5 >>> 7,114 >>> 10.6 >>> 9,638 >>> 10.3
  • iii. Machines >>> 34,638 >>> 81.7 >>> 38,218 >>> 81.9 >>> 42,027 >>> 80.9 >>> 52,831 >>> 79.1 >>> 75,381 >>> 80.4
  • iv. Betting >>> 0,009 >>> 0.02 >>> 0,105 >>> 0.2 >>> 0,167 >>> 0.3 >>> 1,155 >>> 1.8 >>> 1,657 >>> 1.8
  • v. Bingo >>> 0,848 >>> 2.0 >>> 0,893 >>> 1.9 >>> 1,085 >>> 2.1 >>> 1,352 >>> 2.0 >>> 1,599 >>> 1.7
  • vi. Charities >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> –
  • vii. Media >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> –
  • viii. Sales prom. >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> – >>> –
  • Mobile phones >>> – >>> – >>> – >>> – >>> 223 >>> 0.4 >>> 222 >>> 0.3 >>> 247 >>> 0.3
  • TOTAL >>> 42,417 >>> 100 >>> 46,655 >>> 100 >>> 51,938 >>> 100 >>> 66,833 >>> 100 >>> 93,692 >>> 100

Source: Submission to the Enquiry from Lottery and Gambling Supervisory Inspection

The gambling industry is becoming an important industry in Latvia, contributing almost 1% to the annual Latvian GDP and gambling taxes account for 0.25 per cent of GDP.

Ratio of the Gambling Industry in the Total Economic Structure of Latvia:

  • Year >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
  • Gross Gaming Revenues (€ million) >>> 42.417 >>> 46.655 >>> 51.938 >>> 66.833 >>> 93.692
  • Gambling specific taxes and duties (€ million) >>> 8.245 >>> 9.023 >>> 11.925 >>> 13.122 >>> 17.038
  • Other business taxes (€ million) >>> 2,311 >>> 2,307 >>> 2,629 >>> 4,351 >>> 6,640
  • All paid taxes in total (€ million) >>> 10,556 >>> 11,330 >>> 14,554 >>> 17,473 >>> 23,678
  • All paid taxes to total GGR (%) >>> 24.9 >>> 24.3 >>> 28.0 >>> 26.1 >>> 25.3
  • GDP (€ million) >>> 6,667.2 >>> 7,353.9 >>> 8,095.3 >>> 8,996.2 >>> 10,471.5
  • Total GGR to GDP (%) >>> 0.63 >>> 0.63 >>> 0.64 >>> 0.74 >>> 0.89
  • All paid taxes to GDP (%) >>> 0.16 >>> 0.15 >>> 0.18 >>> 0.19 >>> 0.23

Source: Submission to the Enquiry from Lottery and Gambling Supervisory Inspection

There are many international players in the Latvian gambling market. Their participation rates are shown below. Most of them are members of the EU.

Foreign Capital Invested in Latvian Gaming Business (2004)

  • Countries >>> Amount of share capital (€ millions) >>> Proportion in total share capital of gaming business (%)
  • Cyprus >>> 5.165 >>> 19.1
  • Germany >>> 3.709 >>> 13.7
  • Austria >>> 3.201 >>> 11.8
  • Spain >>> 2.322 >>> 8.6
  • The UK >>> 0.946 >>> 3.5
  • Poland >>> 0.761 >>> 2.8
  • Cuba >>> 0.367 >>> 1.4
  • Sweden >>> 0.288 >>> 1.06
  • Lithuania >>> 0.232 >>> 0.86
  • The Czeck rep >>> 0.222 >>> 0.82
  • Isle of Man >>> 0.189 >>> 0.7
  • Belgium >>> 0.071 >>> 0.26
  • USA >>> 0.030 >>> 0.11
  • Latvia >>> 9.554 >>> 35.3
  • Total amount of share capital of gaming business >>> 27.06 >>> 100

Source: Submission to the Enquiry from Lottery and Gambling Supervisory Inspection

The total number of full time employees is provided for every operator, but no information is provided about each gaming unit; therefore it is not possible to give information on employment in the different gaming sectors.

Number of FTEs in Latvian Gambling Industry:

  • Number Of Employees >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
  • Lotteries >>> 85 >>> 87 >>> 91 >>> 101 >>> 106
  • Other Gambling >>> 2,395 >>> 2,488 >>> 3,240 >>> 4,543 >>> 6,542
  • TOTAL >>> 2,480 >>> 2,575 >>> 3,331 >>> 4,644 >>> 6,648

Source: Submission to the Enquiry from Lottery and Gambling Supervisory Inspection

In accordance to Latvian normative acts, no companies from the gambling industry sector are obliged to pay Value Added Tax for gaming activities. However, all companies have to pay state duties (once a year) and gambling taxes (once a month in a one-twelfth ratio from the year’s tax stake), which are levied over and above normal business taxes.

  • State duties (per year):

– for organisation and operation of slot machines, bingo, roulette, cards and dice games for issuance of the special license (when first coming into the market) – €427,000;
– yearly re-registration of the special license – €35,600;
– permission to operate a casino – €28,500;
– permission to operate a gaming or bingo hall – €2,135;
– organization and operation of totalisator and betting – issuance of a special license – €42,700;
– issuance of a special license for national lotteries – €14,300;
– issuance of a special license for national instant lotteries – for each draw – €8,500.

  • Gaming taxes(per year):

– slot machines, that are in casinos and gaming halls – €1,200;
– slot machines, that are outside casinos and gaming halls – €1,650;
– roulette tables – €28,200;
– card and dice tables – €6,830;
– bingo (depending on size of hall) – €22,500 to €31,300;
– totalizator and betting – €42,700;
– internet gaming – 10% from all bets paid and accepted;
– number lotteries – 8% from ticket sales;
– instant lotteries – 10% from ticket sales.

During June 2003 the Saeima approved amendments to the Lotteries and Gambling Law that stipulated the procedure for the operation of interactive gambling. Under the amendment, gambling companies wishing to use interactive telecommunications are required to have a minimum share capital of LVL 60,000 (about €86,000) and apply for an appropriate license. The gambling tax for interactive gambling has been set at 10% of sales.

© European Union

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