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Op-Ed: Bulgarian Online Poker, What a Joke!

Op-Ed: Bulgarian Online Poker, What a Joke! 0001

Things looked promising in Bulgaria for poker players expecting to experience a regulated and safe poker playing landscape, at least on the surface.

The government passed new laws to regulate gambling in March 2012, hoping to create a windfall of newfound tax revenues. This led to much promise as to how the online gaming industry could positively affect the country as a whole.

Unfortunately, the ideals that were put into law were not backed with strong intent. Now, approximately a year and a half later, in the midst of a deepening economic crisis, the country has not collected a single cent from poker.

Why is it that respected online poker operators are getting blocked at the front door? Well, in Bulgaria the problems run deeper than online poker. In Sofia, the capital city, there are daily protests by citizens demanding the resignation of Prime Minister Plamen Oresharski and an end to the corruption that plagues the country. How could a country, which has gained fame for its corruption, be trusted to engage in above board regulatory gaming practice? Only time will tell, but at the moment the outlook looks like a sham.

Dear Bulgaria: You Are Doing It Wrong!

This could be a tale in what not to do in the start-up environment of gaming regulation. All poker operators have been shut down with the infamous "Bulgarian Black List." In fact, there is only one licensed gaming company to date,, a limited company out of Malta, which is centered on sports betting and partially owned by Bulgarian billionaire Vasil Krumov Bozhkov. Bozhkov was said to have alleged ties to the underworld and was featured in this wiki-leaks cable.

This situation subsequently results in zero revenue for the government from poker and encourages the black market of illegal operators to flourish. In turn, this is putting players at risk and jeopardizing the strong poker community in the country.

This situation is bad for all stakeholders — casual players cannot safely play the game they enjoy, professional poker players are out of their jobs, and a plethora of gaming companies within the country are deprived of generating revenue for which to pay their staff legal wages. This grand scheme by the government to generate income from the gambling companies is still sitting behind a mountain of red tape, while billionaire Bozhkov still collects on his license.

Problem? What Problem?

Companies want to pay tax but can't!
Companies want to pay tax but can't!

To put it simply, the Bulgarian government cannot get its act together. They are not capable of issuing online poker licenses in a timely matter, or even proposing laws which make sense. The current laws are ambiguous, either written by someone that has never visited an online poker site or written with the sole purpose of giving a clear-cut advantage certain (currently operating) companies. Pundits are declaring that this law was written to keep the market closed, favoring current Bulgarian companies and friends of the government.

Bulgaria is a great poker market. Several of the top online poker operators fully intend to enter this market, and those companies fully intend to enter it in compliance to regulatory conditions. Bulgaria has a strong poker community, which has supported global liquidity pools and the positive advancement of poker for over a decade. These are some great people and they deserve better.

To make matters worse, look at the contrast between Bulgaria and countries like France and Estonia. These other countries have been able to execute their regulatory practices without much of a hitch. These laws are so oversimplified it is borderline disturbing. It really looks like this is a calculated step by the government to perpetuate their hypocritical agenda.

There are two laws for discussion. The first is actually pretty good; according to article 245, paragraph 1, item 4 of the Corporate Income Tax Act (CITA), online poker operators would be obliged to pay 15% of all commissions collected from gaming. Compared to some other EU countries, this is an affordable and acceptable tax rate.

It is the next law that contains some astonishing "oversight" (if we can call it that). Article 245, paragraph 1, item 3 of the CITA demands another tax fee wherein all casino games (including poker) are imposed with a 5,000 BGN (about US $3,400) fee per "virtual gaming device," to be paid once per quarter. This is where things get a bit weird because this law isn’t defined well enough to give a definition what a virtual gaming device is. After consulting legal experts in Bulgaria, it is agreed that this would go to mean the actual poker tables. Imagine having to pay thousands per financial quarter, for each "virtual table?"

I don’t think so. No operator would be able to sustain that sort of rake.

It is remarkable that something so ambiguous is holding back so much revenue from the Bulgarian’s government coffers and holding back people from attaining jobs in this sector.

Sustainable Taxation

Those words in bold above aren't the most compelling two words in the world, but they are important for governments to recognize. We must acknowledge the importance of sustainable taxation in countries as they slowly move into regulated online gaming environments. This is not a hard feat to accomplish. In a game of poker, the "house" takes a commission. These commissions amount to a small percentage of what is in the pot at the end of each hand or tournament prize pool. As commissions are the only source of income for the online poker operators, it is accepted that kicking back a percentage of the commission to the government is fine and what forms the tax.

What is not fine is trying to burden the online poker operators with an undue double taxation scheme. Such interpretation is contrary to the principles of sustainable taxation and will do nothing but harm the willingness of companies to want to bring poker to town, and in turn will shut down a very lucrative source of tax revenue for the company.

The horrifying part is that there is no clear definition of what a "virtual gaming device" is. Anyone that has ever seen online poker being played will understand this. Virtual poker tables open and close automatically as reflected upon the demand created by logged in players. Players themselves can open a table and play against other players for a few minutes, leave and see the table disappear. The only way I could think to fix this would be to get the coders involved to cap the amount of tables being used, which is hugely problematic. This method would only limit the tax revenue opportunity.

Most online poker players are participating in low-stakes games and online poker rooms host hundreds of virtual tables to accommodate this demand. Taking away the low stakes would not only lower tax revenue, but would pose some concerns in the context of responsible gaming.

Simple Solutions

To sum up and to keep things simple: the lack of licensed online poker operators poses a significant problem for the Bulgarian government. Not only are they missing out on millions of dollars of tax revenue, but they are showing how out of touch with their own people they are. It is also true that live poker in Bulgaria has been severely repressed by the government with this taxation scheme. Now it is more worthwhile to travel to neighboring Romania to play a game of poker.

It’s time for the government and the Bulgarian poker community to step up and attain clarity on regulation. It’s a win-win proposition, which is currently yielding nothing but a loss.

Please note that the thoughts and opinions expressed in this article reflect those of the author and not of PokerNews.

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