The new tax law, which came into force on 1 January 2010, means that machines taxed at BGN1200 in 2009 are now liable for BGN2000.

Regulators in Bulgaria are raising the question of making revisions to the existing Gambling Act, but unless something is done soon it will be too little too late for an industry in arrest.

SERBIA

Gaming is a healthy contributor to the Serbian state, delivering €49.28m in taxes in 2010 from just over 17,500 slot machines. While there are just two casinos in the country, there are 1798 gaming halls with slots; there are no restrictions on the number of slots that a hall can accommodate, but the average is around ten machines per site, though some hold up to 300 machines.

These gaming halls operate under licence, and there are just 72 licence-holders in the country. The major players are Slot Club Aleksandar (GIOIO), which manages around 2000 slots, Admiral Clubs (500 slots), Mozzart (1000), and Grand Casino (300).

JAKTA, Serbia’s national association for the amusement and gaming sectors, says AWPs are not a part of gaming in the country; instead, business is based on regular slot machines, with Novomatic, IGT, Aristocrat and Casino Technology notably successful.

Regulation is currently in a state of flux. Serbia is awaiting the draft of a paper revising the country’s gambling laws; regulators are optimistic, hoping that the revision will fall in line with EU standards and give them greater powers as they attempt to suppress the country’s illegal gaming operations.

HUNGARY

Another Eastern European market seeing decline in amusement gaming, Hungary has experienced a steady fall in the number of gaming machines. Since a 2004 high of 33,141 machines, the number has steadily decreased and in the first quarter of 2010 the total number of units stood at 25,450.

This corresponds with a decline in the number of gaming halls, falling from 19,941 in 2004  to a low of 14,796 in 2010.

The main factor in this decline – as with most other territories experiencing large drops – is taxation, with a marked rise in gaming tax coming into force in 2004. With the global recession affecting the income of players, it’s a combination that makes the industry decline impossible to arrest.

A complete smoking ban will be enforced in Hungary from January 2012, which will all but kill off many in the gaming industry.

There are two machine categories: I and II. However, the categories only refer to the location the machine is in. Category I is for machines in gaming halls, where the main stipulation is two square metres of space for each machine. Category II applies to restaurants and bars, where the law allows a maximum of two machines on each site.

There are 813 Category I halls in Hungary, housing 7392 machines; 12870 Category II locations are the homes of 16,614 machines (2010 figures).

The industry is currently groaning under the weight of an extra tax – above the licence costs and existing tax structure – of a stiff €380 per month, per machine. When the smoking ban hits, expect the decline of Hungary’s gaming industry to quicken considerably. The annual decrease in business of ten percent in 2009, and the same again in 2010, may seem in retrospect like good times.

LITHUANIA

The common thread that links the gaming sectors in most eastern European countries is taxation – that is, over-taxing the gaming industry for a short-sighted quick fix, until the industry ends up in decline and the tax revenue generated drops to a level below where it started.

Lithuania, sadly, is no exception to this. A tax increase on gaming was expected to raise an extra €5.2m for government, but has actually resulted in approximately the same tax being generated in 2010 as was received in 2008; this is only a plateau, however, and 2011 will most likely see a drop in the tax paid.

When the tax increase arrived in December 2008, the concomitant increase in operating costs for gaming salons in Lithuania led to four companies going out of business, and some firms had to close gaming centres which had suddenly become loss-making, Overall, 964 people lost their jobs as a direct result of the taxation increase, according to SCGS (State Commission on Gambling Supervision) figures – that’s 34 percent of the total workforce in gaming in the country. Gambling machines and equipment dropped in volume by more than a quarter, a decline of 991 units.

And last year saw the industry slide further, with 12 more gaming salons closing their doors, and the number of Category B gaming machines falling to 2110 units.

The only silver lining we can see in this cloud is that Lithuania already has a smoking ban (introduced in 2007), so gaming does not have that further blow to come.

POLAND

Many countries are able to fill a void when an industry contracts or stagnates, and this is exactly the case in Poland, where the gaming industry is in freefall – but there is growth in amusement and theme parks, as well as family entertainment centres.

January 2010 saw a massive increase in monthly taxation on gaming machines, a rise equating to 300 percent; that in itself could be seen as the Polish government actively attempting to wipe the industry out, an interpretation reinforced by the fact that new licences are no longer granted and existing licences are not renewed when they expire.

The last licence legally granted will expire in 2014. Gaming will surely move underground with such harsh measures in place, so the government will receive no tax at all and the industry will continue without regulation.

In the short time since the new laws came into effect, the number of machines in the gaming industry has dropped from around 55,000 to just 19,190. Euromat estimates that the industry has contracted by as much as 38 percent in this time.

Elsewhere, however, the news is not all bad. The new laws do not apply to redemption machines that do not employ random-number generators. Polish trade publication Interplay estimates that the market can absorb between 100,000 and 150,000 of this type of machine by 2013.

Also seeing growth are amusement parks, with around 37 travelling examples and several fixed-position parks. Around ten new amusement parks are due to be opened in 2010 alone; Poles show a particular liking for dinosaur parks, with numbers well into double figures, partly because of the low operating costs for owners.

Family entertainment centres are also seeing growth – in part because they avoid the tax burden that slots are now carrying, but also because of Poland’s vastly improved economy and quality of life. People are now earning more, with unemployment falling (from 14.2 percent in May 2006 to 6.7 percent in August 2008), and the country has so far been unaffected by the recession raging through the rest of Europe; in fact, Poland’s economy has had no contraction at all to date.

The growth in amusement parks and family entertainment centres (of which there are around 500) is linked directly to this, with higher earnings and better quality of life leading people to spend more time together as family groups. 

Businesses interested in Poland as an investment or growth opportunity should look to Surexpo – the International Salon of Entertainment Devices & Vending Salon – which has its tenth edition in 2011, running 13-15 October at Centre Expo XXI in Warsaw.

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