The Latvian Licensed Gambling Operators Association (LLAB) strongly opposes the government's plan to raise gambling taxes by January 2026, warning that this move could lead to the closure of over 20 gambling venues nationwide and result in a €2.5 million tax deficit. According to the proposal, the tax rates for interactive gambling and telephone betting will increase from 12% and 15% to 15% and 18%, respectively, and the annual tax on gambling tables and machines will also significantly increase. LLAB points out that the tax increase at the beginning of 2024 has already led to the closure of 24 casinos, and if increased again, the closure wave will continue, and the government's additional revenue estimate of €9.2 million is a "misleading" forecast. The proposal will be submitted to the parliament for approval on October 15.
Tax Increase Proposal and Timing Adjustment
The Latvian government announced plans to advance the gambling tax increase by 12 months to January 1, 2026, originally scheduled to start on New Year's Day 2027. This move is part of the government's 2026 budget plan, aimed at raising additional funds for security, family support, and education.
The proposal includes several tax rate increases, affecting a range of gambling activities, from interactive gaming to physical casino equipment.
Specific Tax Rate Changes Details
According to the proposal, the tax rate for interactive gambling will rise from 12% of total gaming revenue to 15%, and the telephone betting tax rate from 15% to 18%. Additionally, the annual tax on gaming machines will increase from €6,204 to €7,440.
The annual tax on roulette, card, and dice tables will significantly increase from €33,696 to €40,440, significantly raising the operating costs of physical casinos.
Industry Opposition and Warnings
The Latvian Licensed Gambling Operators Association (LLAB) strongly criticizes the tax increase plan, warning that this move will lead to a decrease rather than an increase in tax revenue. The association predicts that by 2026, more than 20 casinos and 10 gambling tables may close.
LLAB representative Juris Celmārs stated: "By raising the tax rates for casinos and slot machines, the promised budget growth will not be achieved. Instead, budget revenue will decrease."
Historical Data and Industry Trends
LLAB points out that Latvia's gambling tax had already risen by 20% at the beginning of 2024, leading to the closure of 24 casinos. Over the past 20 years, the number of casinos in the country has decreased by more than 70%, from 327 in 2005 to 168 as of June 2024.
The number of slot machines has also continued to decline, from 4,916 in January 2024 to 4,037 in September, reflecting an overall industry contraction trend.
Revenue Impact and Market Changes
Data from the first half of 2024 shows that slot machine revenue fell 12% to €55 million, and table game revenue decreased by 12.5% to €4.7 million. This downward trend is directly related to the reduction in venues and equipment.
LLAB emphasizes that market rules and trends show a continuous decline in physical casino turnover, and the tax increase will accelerate this process, further reducing government tax revenue.
Government Goals and Revenue Estimates
The Ministry of Finance estimates that the tax increase will bring in an additional €9.2 million in revenue, which is planned to be used for security, family support, and education projects in the 2026 budget.
A package of laws related to the budget (including the increase in gambling taxes) will be submitted to the parliament for approval on October 15, as the government seeks to raise an additional €565 million.
Industry Questions and Criticisms
LLAB criticizes the tax increase proposal for being presented without consultation with the gambling industry and questions the government's forecasts, calling them "misleading." The association points out that the government has not fully considered market rules and trends.
"Not only does it not follow the principles of good governance, but it also makes misleading predictions about the impact of tax changes on budget revenue," LLAB stated in a declaration.
International Examples and Comparisons
The Dutch market's similar reforms provide a reference case. After the tax increase, total gaming revenue in the first half of 2023 fell by 25% compared to the previous year, and tax revenue was only 83% of the same period in 2022.
Although the Netherlands has raised the gambling tax rate to 34.2% of total revenue starting January 2024 and plans to further increase it to 37.8% by 2026, tax revenue has still significantly decreased.
Future Outlook and Potential Impacts
If the proposal passes, the Latvian gambling industry is expected to face further consolidation, and small operators may be forced out of the market. LLAB warns that this could lead to gambling going underground, posing greater social risks.
The government needs to find a balance between increasing revenue and maintaining a healthy regulatory environment to avoid excessive taxation leading to industry shrinkage and reduced tax revenue.
