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In less than a few weeks the frenzy around the Super 5 lottery has swept the attention of many. The jackpot of over Lm500,000 has mesmerised punters and no doubt has dried the cash lake of organised gamblers and the disposable income of more than a few families.
The mystery about the success of this game is that while it was being administered by the State it did not attract the masses and never reached such a high jackpot level. Regrettably this game, whose profits were previously used to swell the national coffers, is now the envy of a Greek-owned company, which was selected during the privatisation offer and given a seven year exclusivity licence.
Sitting on top of an exclusive concession it faces no competition on its turf. Another sector which one hopes Government will start regulating is the spread of virtual lottery terminals or one-armed bandits which according to informed sources total around 12,000. Each of these machines function like a mini casino using a random number generator but the pay-out rates vary and regrettably most are still unregulated. Such machines are not taxed and the pay-out modules are not subject to inspection. There was a rumour that the authorities were expecting that all machines need to conform to a standard specification. The idea was to harmonise the games on offer and provide for fair treatment of players. An announcement was made in the 2004 budget to tax this sector but the process is still ongoing. Apart from the proliferation of arcade machines one also notes the blossoming of foreign owned online gaming companies. These companies are highly regulated and are subject to tax although they are exempt from VAT under EU rules.
This augurs well for the island to position itself as one of the leading lights in the European gaming map. It is not surprising how gaming regulators in competing jurisdictions have studied each and every market aggressively to attract quality operators to be able to generate sustainable employment and tax revenue for their country. So the obvious question to ask is whether Malta is ready and able to milk the cash cows that can be convinced to set up their servers and control systems in Malta?
So far, licensed companies generate over Lm1 billion in revenue all of which is subject to tax. There is no doubt this extra revenue comes in handy for the taxman and will shortly generate over five hundred direct jobs.
It is anticipated that as the sector expands turnover in the short term will easily surpass the Lm5 billion mark. This directly benefits the economy particularly in the generation of foreign currency with its obvious positive multiplier effect.
It is evident that an increasing number of investors started showing interest in locating to Malta. Undoubtedly investors are further encouraged by quality bandwidth facilities. These have doubled due to Vodafone’s massive investment in a secondary submarine cable.
Concurrently there have been serious enquiries from blue chip operators who are keen to use Malta as a hub for web farming and data transmission.
But in view of the success so far can Malta rest on its laurels?
Certainly not. The British are moving fast to become one of the most trusted and respected online gaming jurisdiction in the world. Recognising the potential of the British market, only sites that are licensed and registered with the UK Gambling Commission and who have hosted their equipment in approved jurisdictions would be permitted to advertise in the UK. The Brits are wooing back operators who in the late nineties fled to offshore jurisdictions. Certainly with the massive competition out there it is a safe bet to say that the fly-by-night operations do not last long. Remember that online casinos want to stay in business because they make money. The only way for them to stay in business is to attract players so the rationale goes that the only way for them to attract players is to operate a legitimate and honest site. A number of jurisdictions like Malta are now insisting on operators to give free counselling to habitual gamblers. Conferences are organised on a national basis to discuss pathological gamblers and discuss remedies for their cure.
Gambling is not a magic way to make money and the rationale should be that players enjoy gambling as a form of entertainment. It is relevant to reiterate here that Malta prohibits its online operators from accepting bets from local residents yet there is no comparable restriction on the foreign owned lottery operator or the arcade machines.
Naturally regulations need to be revised and fine tuned to reflects the need of dynamic industry. Again there should be a level playing field for all types of gaming in terms of regulation.
No discrimination is considered permissible be it for the monopoly lottery operator, arcade games or remote gaming operators. The pendulum swings both ways. It goes without saying that the fruits of our initial success to attract foreign remote gambling operators should not tempt the authorities to be over zealous in heaping on more bureaucracy.
Learning from past mistakes, over–regulation can kill the goose that lays the golden egg.
gmm@pkfmalta.com
The author is a partner
in PKFMALTA
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