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. Last Updated: 07/27/2016

Tax Service to Issue Gaming Licenses

The market players in Russia's booming gaming industry on Friday welcomed the government's move to bring more clarity to sector's regulation by appointing federal tax authorities in charge of issuing licenses but also warned about the risks of concentrating too many powers in the hands of the taxman.

The Cabinet decided Thursday to place the authority to grant licenses to gambling establishments under the jurisdiction of the Federal Tax Service. The decision, which is to come into effect after the government publishes the formal regulation, will resolve the months-long deadlock over gambling licensing.

"No one is in charge of this now; it needs to be decided who will be in charge," Finance Minister Alexei Kudrin said during last week's Cabinet meeting.

All gambling licensing has been stalled since January after the State Sports Committee was disbanded last year, and its successor, the Federal Agency for Physical Culture, Sports and Tourism, did not inherit the committee's powers to issue permits.

"We support this decision" to place licensing under the tax service's jurisdiction, said Yevgeny Kupsin, president of Golden Garden Club, operator of St. Peterburg's Zolotaya Strana casino.

"Giving both the permit and the control functions to one authority is one more step toward [building] a civilized gambling market in Russia," Kupsin said in a written response.

Other market players, however, warned that placing both licensing and tax oversight with the tax service would give the government body unlimited power.

"You cannot place all of your eggs in one basket," said Samoil Binder, deputy managing director of the Association for the Development of the Gaming Business. "With all due respect to the tax authorities, licensing, oversight and punishment should not be concentrated in one place," he said.

One body will receive too much leverage, he said, if it alone decides who can and cannot work in the market and also has the power to schedule back tax checks and levy fines.

Even though just the country's slots machines market is worth $3.5 billion, according to MDM Bank's estimates, Russia still does not have a federal law that regulates the gaming industry.

Authorities, however, have been gradually tightening control of the market. Earlier this month, the Moscow City Duma voted to double gambling taxes as of next year. Starting in January, each slot machine in will be taxed 7,500 rubles ($262) per month, while bookmaking venues and gambling tables will be taxed 125,000 rubles ($4,369) per month.

"It is unclear what criteria the tax service will use for licensing, said Lavrenty Gubin, spokesman for Storm International, a Moscow-based operator. "The [gaming] industry needs serious regulation. Whether the Federal Tax Service has the qualifications to carry it out remains to be seen," Gubin said.

Staff Writer Valeria Korchagina contributed to this report.