MGA Needs to Put Foot Down on Reporting and Gaming Tax Collection

Following the annual verification exercise carried out by the National Audit Office (NAO), it was revealed that gaming operators were not always respecting their reporting obligations with regards to players’ liabilities and taxes. The NAO tested 45 licences, 1 belonging to the National Lottery Operator, 2 to casinos and the rest to remote gaming operators. Collectively, these accounted for €26,476,866 in gaming tax revenue, out of a total of €53,785,256 in tax revenue payable to the Malta Gaming Authority (MGA).

In the audit carried out by the NAO, it resulted that financial statements presented by gaming operators did not contain the sufficient information with regards to players’ liabilities and tax. This puts the MGA in a risky position, particularly in the eventuality that an operator ceases all operations and does not have sufficient finances to cover players’ funds.

The NAO also found that 16 companies, holding a total of 29 licenses among them and invoiced over €3.5 million in gaming taxes, did not regularly present the required reports about their financial resources. Without having the ability to gauge whether operators are able to cover players’ funds, the MGA finds itself in a very difficult position, even more so when it is not able to counteract in a timely manner, as outlined by the NAO.

The current requirements call for gaming operators to present monthly reports stating the balance of players’ accounts, balances in relative credit institutions, funds in transit as well as funds not yet cleared and the resulting surplus or shortfall. The latter implies insuffucient funds in the operators’ bank accounts to cover players’ balances should all operations be terminated.

The NAO further stated that the MGA, being unable in certain instances to assess and calculate the correct amount due by operators in tax, was unquestioningly accepting the amount declared by the operators. Similar issues were encountered during the exercise carried out, whereby when calculating taxes due by the National Lottery operator and the two casinos under review, the figures put forward by the National Lottery operator and one of the casinos were not a sufficient breakdown of the revenue generated by different games. Because of this, the amount due in taxes could not be calculated by the auditors, as different games are taxed at different rates.

In October 2015, the MGA employed 2 financial compliance officers responsible for ensuring that any shortfalls are immediately reported and addressed after seeing that monthly reports on players’ liability returns are submitted and analysing them. Officials on behalf of the MGA confirmed that no procedure for the checking of taxation documents and payments submitted by operators and licencees was in place in 2014 and vetting was only being carried out in specific instances such as when a license was due to be renewed.

As a response, the MGA has set up a Revenue Assurance Unit, in charge of regularly assessing and categorising licencees’ tax leakage as low, medium or high. High-risk licencees will be made subject to a financial compliance review.