Leading British bookmaker William Hill has stopped its operations in the Czech market. This happened ahead of the online gambling regime that went live on the 1st of January in that country. The company offered a basket of products including casino games, poker, and of course, sports betting.
William Hill sent out an email message to its affiliates in the Czech Republic informing them of the pull out. However, the message in question did not indicate whether this was a permanent or temporary measure. In fact, the question still remains whether the company has merely stopped its operations prior to applying for a gambling license in the country.
Why Did William Hill Pull Out of the Czech Market?
The company did state that its pull out was on account of the country’s new regulatory structure. It will no longer be accepting business from customers from anywhere in the country. But it will enable them to withdraw their money. The bookmaker has also instructed its affiliates from taking down all marketing material from their websites. Especially, the ones that targeted bettors from the Czech Republic. The email finished off with a hope that the business relationship could be resumed in the future.
The brainchild of Andrej Babis, the former Soviet satellite state’s finance minister, and deputy prime minister, the new tax laws have been designed to make it difficult for online gambling companies to operate in the country. Indeed, they seem to be having the desired effect.
Babis is the second richest man in the country and head of an agriculture and media empire. He has made no secret of his dislike of online gambling. In addition, he is firmly against foreign companies offering gambling services in the Czech Republic. However, the country is compelled to permit cross-border trade since it is part of the EU. He has quite clearly designed the tax structure to deter foreign operators without straying from the EU regulations. Furthermore, he seems to have support from President Miloš Zeman. The other lawmakers are also on his side since the bill was passed unanimously last June.
Painful Tax Structure – One of the Main Reasons for William Hill’s Exit
Online gambling operators are no doubt used to paying very high taxes in regulated markets. But the new tax regime in the Czech Republic is going to be very difficult to work with. At 35% tax on gross gaming revenue for any game that uses a Random Number Generator (this covers most of the existing casino games and poker that form the bulk of a casino’s portfolio), it is unlikely that smaller companies will be able to survive in this market. Furthermore, they will have to bear a 19% corporation tax. As far as bookmakers like William Hill are concerned, the tax on sports betting is a relatively low 23%. That still doesn’t make much business sense!
The new online gambling regime also contains provisions to identify unlicensed gambling sites to blacklist them. Czechs currently spend approximately $6 billion annually at offshore gambling sites. The government is determined to put a stop to this, if necessary by blocking ISPs. Needless to say, this has raised a furore with net neutrality advocates opposing it fiercely. Babis’ widespread business operations also had to face cyber attacks launched by the hacktivist group Anonymous.
Uncertain Future for the Czech Republic
The Czech Republic is a very lucrative market for gambling, especially poker. But it is hard to see how companies will be able to thrive under the new regulatory regime. It will be interesting to see how many come forward to take an online gambling license from the country. The unregulated market will no doubt continue to flourish. It will until the government starts to blacklist and block ISPs, which it has clearly stated it will do.