Czech Ministry of Finance Criticized for Inaction on Gambling Law Violations, Calls for Legislative Changes

Prague, Czech Republic – The Supreme Audit Office (NKÚ) of the Czech Republic has expressed its dissatisfaction with the Ministry of Finance over its failure to take decisive action against gambling operators repeatedly violating the law. The NKÚ’s audit revealed that essential permits were not revoked, and deposited guarantees were not utilized to settle outstanding taxes owed by these operators. Furthermore, the report highlighted a significant increase in the volume of bets received, with online gambling experiencing a staggering 300 percent surge between 2017 and 2021.

During the audited period, the state collected CZK 50.5 billion in taxes from the gambling industry, representing a growth rate of only 24 percent, while the volume of bets received soared by 119 percent to reach CZK 1.8 trillion. This discrepancy raised concerns about the efficacy of tax collection measures and the ministry’s ability to regulate the sector effectively.

The NKÚ underscored the delayed and insufficient response of supervisory authorities to the surge in online gambling, emphasizing that while the Czech Customs Administration conducted 239 inspections at physical gambling establishments in 2020 and 2021, only 80 inspections were carried out on online gambling operators. This disparity highlights a regulatory gap that needs to be addressed promptly to ensure the proper oversight of the rapidly expanding online gambling market.

Another issue highlighted in the audit was the persistent problem of malfunctioning information systems. The NKÚ found that the current systems do not provide comprehensive, reliable, and usable data to state administration authorities. This issue had already been identified in an audit conducted nine years ago, indicating a lack of progress in rectifying the problem.

The report revealed significant discrepancies between data in the new Gambling Operations Information System (AISG) and tax returns. In a sample inspection of 15 tax returns from gambling operators, the data in the AISG did not match the data in any of the tax returns, exposing the unreliability of the information system.

Moreover, the auditors criticized the ministry for its lenient approach towards operators who repeatedly violated the gambling law. Despite receiving 76 fines totaling CZK 94.2 million from the Customs Administration between 2017 and 2021, the ministry did not utilize legal options to revoke permits or penalize these operators adequately. The ministry defended its actions by stating that permit revocation is an extreme measure and cited potential lawsuits and claims for billions of crowns in compensation as a reason for its cautious approach.

In response to the audit findings, the NKÚ recommended legislative changes to expedite the process of blocking illegal online gambling, which currently takes over a year. The ministry intends to submit an amendment to the government soon to streamline and shorten the process, aiming to combat unauthorized online gambling effectively.

The outcome of the audit highlights the need for robust regulatory measures and efficient enforcement mechanisms in the Czech Republic’s gambling sector. By addressing the identified shortcomings and implementing the recommended changes, the government can ensure the integrity of the industry, protect consumers, and maximize tax revenues from this thriving market.

Article by Prague Forum

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