NKÚ: State Fails In Gambling Control, Problem Is In Digitalization

The Czech Republic’s Supreme Audit Office (NKÚ) has criticized the Ministry of Finance for failing to revoke essential permits or use deposited guarantees in some cases to pay off outstanding taxes of gambling operators repeatedly violating the law. From 2017 to 2021, the volume of bets received increased by 119 percent to CZK 1.8 trillion. The state collected CZK 50.5 billion from taxes, while tax collection growth was only 24 percent. The ministry has prepared an amendment to address the shortcomings.

According to NKÚ, bets are shifting online, with online betting increasing by nearly 300 percent during the same period. “Supervisory authorities responded to the steep rise in online gambling with a delay and insufficiently. While the Czech Customs Administration conducted 239 inspections in brick-and-mortar establishments in 2020 and 2021, it conducted only 80 inspections at online gambling operators,” the auditors warned.

The NKÚ also pointed out persistent problems with information systems that are not fully functional and do not provide state administration authorities with complete, entirely usable, and reliable data. This problem was already highlighted in an audit nine years ago.

As revealed by the audit, some data is only available in paper form or in “auxiliary Excel tables,” and these are amounts in the billions of crowns.

“Data unreliability of the new information system is evidenced by the results of the sample inspection of 15 tax returns of gambling operators. Data in the AISG (Gambling Operations Information System) did not match the data in any of the tax returns,” the report stated.

Dozens of fines were no problem

According to the auditors, the ministry did not use legal options to revoke permits or penalize operators who repeatedly violated the gambling law between 2017 and 2021. During that period, it received 76 fines from the Customs Administration, also imposed at the bottom of the legal rate.

The Customs Administration imposed enforceable fines of CZK 94.2 million between 2017 and 2021.

The ministry argues that revoking gambling permits is an extreme solution. “It is necessary to consider the severity of the violation and the recidivism of the offense. If the MF revoked permits more restrictively, there would probably be no gambling operators left in the market, and the state could face lawsuits for billions of crowns in compensation for damages,” the ministry justified its procedures.

According to the NKÚ, another problem is that adding illegal online gambling to the list of unauthorized activities takes more than a year. During the period, 794 such operators were identified. Therefore, the NKÚ recommended a change in the law. The ministry intends to submit this amendment to the government shortly to streamline and shorten the process of blocking illegal online gambling.