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Ukraine bureaucrats criticized for lack of progress on regulated gambling

The Accounting Chamber of the Ukraine has fired a broadside at apparently procrastinating civil servants in the country, submitting a report to the top echelons of government criticising the lack of progress on tightening up gambling regulation in the Eastern European country, which was formerly part of the Soviet Union.
 
Noting that effective regulation was necessary to reduce opportunities for criminals, protect gamblers and raise tax revenues for social expenditure, the Chamber said it had studied existing legislation in urgent need of revision and concluded that practically no changes had occurred since the last audit in 2007.
 
"The Cabinet of Ministers of Ukraine, the Ministry of Finance of Ukraine, the State Tax Administration of Ukraine, the State Committee of Ukraine for Technical Regulation and Consumer Policy have neither established an integrated system for state supervision of gambling nor ensured proper state regulation in this sphere within 2007-first quarter of 2008," the report accuses.
 
The Accounting Chamber Board found that the primary causes for the lack of progress were a lack of dynamism in the state bodies responsible for legislative and regulatory state policy determination; the lack of a state coordinating organisation to harmonise the efforts of the diverse government bodies involved in the gambling industry and an 'inappropriate' response to the proposals of the Accounting Chamber, which appeared to have been ignored. 
 
Accounting Chamber auditors found that despite an acceptance of conclusions and proposals from the Accounting Chamber on the previous audit, the Cabinet of Ministers and the Ministry of Finance did little to implement necessary changes and encourage other state bodies to take action.
 
"Legislative and regulatory framework of [the] gambling business is incomplete and improper and disputable issues are unsolved," the Board commented, adding that after rejecting the governmental bill Verkhovna Rada of Ukraine did not consider any bill on gambling business regulation submitted by the People's Deputies.
 
The Cabinet of Ministers of Ukraine did not present new law to better regulate gambling business, and the Ministry of Finance of Ukraine as well as other state authorities did not meet their obligations to improve the existing laws or initiate new laws.
 
At present, gambling laws were too fragmented and scattered among numerous central and regional authorities, the Board commented. What was needed was a cohesive system to exchange information and focus on the number of entities subjected to state regulation, their licenses, financial performance and budgets at all levels, and this had not been established.
 
The audit uncovered numerous cases of the Ministry of Finance of Ukraine violating the existing legislation while exercising state functions  regarding the gambling business through its licensing regime. And auditors claimed that supervision by the Ministry of Finance of Ukraine regarding compliance was small-scale and ineffective. The audits covered only 0.4 percent of licensees of the Ministry of Finance of Ukraine in 2007 and first quarter of 2008.
 
"State regulation of gambling through patenting by the State Tax Administration of Ukraine is ineffective since it is not coordinated with [the] licensing function of this activity by the Ministry of Finance of Ukraine," the report advises. "Consequently, about two thousand entities conduct gambling activity with trade patents but without proper licensing from the Ministry of Finance. Taxation of gambling business under general conditions is inadequate, does not generate the state budget revenues or meet the international standards," the Chamber found.
 
Accounting Chamber auditors also discovered that state officials had not introduced an international certification system for slot machines with due consideration of critical requirements, namely on gains size. Consequently, over 120 000 non-certified slot machines are operated in Ukraine offering the potential for large-scale fraud.
 
The Accounting Chamber experts concluded that the Ministry of Finance and the State Tax Administration had not used all available means to increase tax revenues from gambling sources, had not given sufficient scrutiny to the allegedly unprofitable performance of gambling businesses and ultimately had not ensured that appropriate revenues accrued to the state coffers.
 
According to the auditors' estimates, compliance with and improvement of the existing legislation and regulatory framework, together with the introduction of efficient payment and monitoring measures could result in an additional UAH 4 billion or more for the state budget.
 
The Accounting Chamber Board resolved to inform the President of Ukraine, the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine about the audit results, including recommendations to improve the efficiency of state bodies dealing with the gambling industry in Ukraine.



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