RGA Warns Against Black Market Stimulation in Montenegro

Published February 26, 2015 by Lee R

RGA Warns Against Black Market Stimulation in Montenegro

Discouraging applicants will lead to less revenue for any government.

The Remote Gambling Association has voiced a rather ominous perspective on Montenegro's proposed online gambling regulation.

Excessive Taxation Bad for Online Gambling Regulation

The comments, which were expressed during a press conference in the tiny republic, were centered around the excessive taxation system for local licensees amid concerns that citizens will seek black market operators to circumvent the financial burden.

The RGA claimed that the recent examples in Europe suggested that high taxes have proven to discourage license applicants, leading residents to seek out unlicensed gambling providers, thereby depriving the government of the full range of tax benefits that new regulation is intended to optimize in this new era of online gambling legislation.

High taxes do cut into financial incentives for private independently owned operators, who lose the competitive benefits of commerce when the taxes cut into their profit margins or projections. The fact is it is cheaper to operate offshore without a license in a heavily taxed area such as Montenegro, for fundamental reasons such as the lack of local duties that lead to more competitive pricing and more diversity of games to customers.

Over Half Unlicensed

The RGA's warning certainly represents an ironic twist, in a situation where government authority is not sufficient to garner financial incentives when the levies impede on effective competition among licensees in a given jurisdiction. This serves as a salient reminder that while autonomous in their regulation policies and processes, government power is limited by the natural dynamics of free trade.

Currently, over 50% of Montenegro operators remain unlicensed, meaning that the government is being deprived of taxable benefits in the same percentage of domestic online gambling services.

Standardizing the Regulation Model

The RGA generally suggests a tax structure model that determines and levies an effective rate, meaning a rate which is absorbable by applicants, to the point that governments can rely on steady and expanding revenues through welcoming operators instead of freezing them out with overly heavy taxes such as in Montenegro right now.

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