Authors:
Mateea Codreanu, Partner
Diana Anghel, Associate
Recent legislative changes in the gambling field have generated a series of economic challenges for this industry, leading more and more organizers to cease or restructure their activities.
While the Romanian legislator and public opinion have focused on reducing the budget deficit and protecting vulnerable gamblers, gambling organizers have had to re-evaluate their financial and operational strategies to cope with the new regulations.
New challenges for gambling organizers
The amendments following the entry into force of Government Emergency Ordinance no. 82/2023 and of Law no. 107/2024 on the organization and operation of gambling mainly concerned the increase in fees, the conditioning of granting the license by being registered or having a permanent establishment in Romania and the prohibition of operating slot-machine gambling in localities with a population of less than 15,000 inhabitants.
These measures are part of a broader package of tax reforms aimed at bringing additional revenues to the State budget, reducing the budget deficit, and discouraging excessive participation in gambling. The regulatory framework is constantly changing, and the Ministry of Finance published on 20 June 2024 a new draft enactment with a major impact.
From the explanatory memorandum of Government Emergency Ordinance no. 82/2023, we understand that the authorities aim to increase by up to 40% the revenues collected to the State budget, which will allow the allocation of funds for activities and programs for the prevention and treatment of gambling addiction.
Thus, through Government Emergency Ordinance no. 82/2023, the fees levied for gambling activities have increased considerably, being in some cases even a hundred times higher. Some of the most resounding increases were the license fee for slot-machine games (from EUR 75,000 to EUR 150,000 annually), the minimum fees for the operating authorization for remote gambling (from EUR 115,000 and EUR 120,000, respectively, to EUR 400,000 annually), as well as the annual contribution of the licensed remote gambling organizers in class I (from EUR 5,000 to EUR 500,000).
The substantial increase in fees and the territorial limitation of the gambling activity operation have been challenged by many economic operators and representative associations in the industry, which argued that these measures are discriminatory and designed to favor large operators to the detriment of small and medium-sized operators, that will not be able to afford to pay the new fees and will be forced to close their businesses.
However, the decision of some organizers to cease their activity has, in itself, proved to be extremely costly. By reference to the obligation of the organizers to pay, after the cessation of activity, the outstanding balance of the annual fee related to the gambling operating authorizations, many organizers find themselves unable to pay the fees imposed by the decisions to cease activity, issued by the National Gambling Office (ONJN).
In this context, more and more organizers are choosing to challenge the decisions of the ONJN and the minutes establishing the amounts owed, filing preliminary complaints with the ONJN and being determined to go to court for the annulment of the excessive payment obligations imposed following the cessation of the gambling activity.
Many such claims are still pending, and some courts in the country have ruled in favor of the organizers, in the sense that the fees owed by gambling organizers are based on the conduct of an income-generating activity, and that they cannot be liable to pay fees if the income was not actually earned.
Such court actions highlight the increasingly deep and frequent disagreements between gambling organizers and the ONJN. Moreover, the latest activity report published by the ONJN states that, in quantitative terms, the largest share in terms of representation before the courts was covered by “cases concerning preliminary complaints lodged by legal entities sanctioned for non-compliance with special legal provisions regulating the field of gambling, which were registered in previous years and then actions for annulment of decisions/suspension of acts/the effects of administrative acts (decisions).”
On the other hand, most gambling organizers choose to continue their activity, seeking solutions to adapt to the new legislative context. According to press releases issued by the Romanian Association of Gambling Organizers and Producers (AOPJNR) last year, companies in the sector are “investing in survival”, with over 60% of them being small and medium-sized local companies.
In the context of legislative uncertainties, on 20 June 2024 a Draft GEO was published to amend Ordinance no. 77/2009, according to which operators no longer owe the outstanding balance of the annual fee if they give up the license due to failure to comply with the operating conditions and will benefit from the refund of certain amounts paid for slot-machines.
It is yet to be seen whether this Draft GEO will address an inevitable restructuring of the industry, by reference to the main desire of gambling organizers to benefit from a predictable, transparent regulation, aimed at achieving a balance between revenue generation to the State budget, business profitability and social responsibility.