Economics of Gambling in Hungary – Lottery

Betting and gaming in Hungary is under the authority of the Ministry of Finance and is supervised by the Hungarian Gambling Supervisory Authority. The state lottery, Szerencsejáték Zrt., was founded on 1 January 1991 as the successor to the Sports Betting and Lotto Directorate of the Országos Takarékpénztár ( National Savings Bank ).

In 1992 Szerencsejáték Zrt. also acquired shares in the casino and horseracing betting markets and started selling instant tickets. In 1995 Szerencsejáték Zrt. pulled out of racing. The same year, comprehensive gaming legislation put the end to as many as 50,000 black market operations.

The Hungarian betting and gaming industry grew throughout the late 1990s, but has contracted significantly since due to a Government decision to restrict the casino industry as it prepared for accession to the EC on 1 May 2004. A number of casinos closed as the Government sought to centralise and control the industry, in 2005 leaving just two casinos operated by Szerencsejáték Zrt. as well as four others operated privately. Among them, the six properties attracted approximately 365,000 visitors in 2004.

Hungarian Betting and Gaming Sales: Betting Handle, Lottery Sales, Casino and Gaming Machines GGY(1992-2002)

Source: Adapted from GBGC Report

The Hungarian Gambling Market by Sector 2004:

Gambling Sector >>> Number of organisers >>> GGR (thousands of HUF)* >>> GGR (thousands of Euros) >>> Market share (%)
Lotteries >>> 1 >>> 61,958,090 >>> 245,904 >>> 41.67
Betting 2 >>> 6,581,197 >>> 25,705 >>> 4.43
Casinos 6 >>> 10,098,491 >>> 39,443 >>> 6.79
Gaming Machines (money winning) >>> 1,194 >>> 70,034,743 >>> 273,545 >>> 47.11
Total Gambling >>> 1,203 >>> 148,672.521 >>> 594,690 >>> 100

Note: 250 Hungarian Forint (HUF) equals approximately 1 Euro

Source: Submission to the Enquiry from Hungarian Ministry of Finance

Hungarian Gambling Market Shares 2004:

Source: Centre for the Study of gambling, Salford, own analysis.

The license and supervision fees are paid directly to the Gambling Supervisory Authority (SZF)

Gaming License and Supervision Fees Paid 2000 – 2004 (in million HUF):

Year >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
Slot machines (money winning) Category I >>> 563.2 >>> 720.3 >>> 870.35 >>> 887.4 >>> 1,236.44
Slot machines (money winning) Category II >>> 1,677 >>> 1.641.48 >>> 1,814.05 >>> 1,799.12 >>> 2,673.925
Data amendment in accreditation certificate >>> 1.05 >>> 3.25 >>> 5.217 >>> 8.07 >>> 10.897
Gaming Halls >>> 70.84 >>> 64.18 >>> 55.48 >>> 53.95 >>> 165.94
Casinos >>> 4.07 >>> 4.07 >>> 3.814 >>> 2.99 >>> 1.67
Lotteries >>> 34.94 >>> 41.15 >>> 62.05 >>> 41.15 >>> 68.45
Betting >>> 0.07 >>> 4 >>> 5 >>> 4 >>> 6
Total >>> 2,351.17 >>> 2,478.43 >>> 2,815.96 >>> 2,796.67 >>> 4,163.31
Supervision fee >>> 242.97 >>> 307.99 >>> 346.99 >>> 406.43 >>> 441.45

Source: Submission to the Enquiry from Hungarian Ministry of Finance

GAMING SECTOR ANALYSIS

Lotteries

The 1991 Gambling Act formulated general rules for the operation of lotteries. A decree of the Ministry of Finance (32/2005 (X. 21.) PM) governs detailed rules of lotteries. The Act requires that number draws licence may only be granted to companies with 100% state ownership, while companies with major state ownership may issue instant tickets.

Since 1997, Szerencsejáték has had a monopoly for lottery sales in Hungary. Szerencsejáték Zrt. contribute directly to good causes such as health, culture, and sports and as a significant taxpayer and a reputable state-owned corporation, it is a major contributor to the National Treasury.

Szerencsejáték’s Sales (1991-2003)

Source: Adapted from GBGC Report

Hungarian Lottery Sector 2000 – 2004:

Year >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
Number of organisers >>> 1 >>> 1 >>> 1 >>> 1 >>> 1
GGR (000 HUF) >>> 32,548,172 >>> 38,383,735 >>> 54,741,308 >>> 71,236,921 >>> 61,958,090
GGR (000 Euro) >>> 127,128 >>> 149,921 >>> 213,811 >>> 278,240 >>> 241,998
Market share (%) >>> 40.54 >>> 39.85 >>> 45.05 >>> 48.43 >>> 41.67

Source: Submission to the Enquiry from Hungarian Ministry of Finance

Hungarian Lottery Sector Growth 2000 – 2004: (thousands of Euros)

Source: Submission to the Enquiry from Hungarian Ministry of Finance

Szerencsejáték Zrt. sales rose to HUF 10.2 billion (€41.452 million) during 2002, reflecting an average of approximately 3 million tickets sold per week. During the previous year Szerencsejáték Zrt.’s sales were HUF 74.1 billion (€301.1 million) of which it had paid out HUF 29 billion (€117.940 million) in prizes.

The overall tax revenue from Szerencsejáték Zrt’s various gaming facilities, including number games, betting, and casinos reached HUF 40.0 billion (€162.5 million) in 2002. Sales rose by 20.6% to HUF 123.5 billion (€501.2 million) in 2003, this represented an average of HUF 14,670 (€59.54) per adult. (Source: GBGC Report)

SzerencsejátékZrt’s telephone and Internet gambling were approximately 0.2% of all sales. Under Hungarian gambling legislation, betting and gaming can not be offered via telecommunication means and systems without holding a licence.. Furthermore, no intermediary activity in respect of gambling organised abroad is permitted in Hungary, nor is the advertising of such activities.

The taxation system is complex in Hungary. Szerencsejatek Zrt. has to pay 30% of instant tickets GGR, 24% of lotto turnover and 17% of joker turnover as gambling taxes .

Lottery Tax System in Hungary:

Lottery Type >>> Tax
Lotto >>> 24% of turnover
Joker >>> 17% of turnover
Drawing game (Instant tickets) >>> 30% of GGR
Keno >>> 24% of GGR
Other number games >>> 17% of turnover
Other lotteries, not continuously organised >>> 16% of turnover
Low value lottery games (Tombola) >>> Require no licence and pay no tax

Source: Submission to the Enquiry from Szerencsejátek Zártkörűen Működő Részvénytársaság

In addition to taxes, state-owned Szerencsejatek Zrt. contributes to good causes by subsidising various organisations and foundations in culture, sports and heath of its choice.

Amount Spent on Good Causes 2000 – 2004 (in mHUF and € million):

Year >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
Total direct support (in mHUF) >>> 144 >>> 256 >>> 422 >>> 1,118 >>> 739
Total direct support (in € million) >>> 0.569 >>> 1.01 >>> 1.67 >>> 4.42 >>> 2.92

Source: Submission to the Enquiry from Szerencsejáték Zártkörűen Működő Részvénytársaság

In addition to the above, Szerencsejáték is required to spend a part of the game tax on the support of professional and recreational sports through the state budget.

Amount Spent on Sports Through The State Budget 2000 – 2004 (million HUF):

Year >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
Total support through state budget >>> 1,991 >>> 2,345 >>> 2,955 >>> 3,321 >>> 3,767

Source: Submission to the Enquiry from Szerencsejatek Reszvenytarsasag

Number of Szerencsejáték Employees 2000 – 2004:

Year >>> 2000 >>> 2001 >>> 2002 >>> 2003 >>> 2004
Full-time employees >>> 1,023 >>> 993 >>> 1,009 >>> 1,023 >>> 1,034
Part-time employees >>> 147 >>> 153 >>> 159 >>> 186 >>> 235
Total staff on average* >>> 1,170 >>> 1,146 >>> 1,168 >>> 1,209 >>> 1,269

Note: 70% of the employees are employed in their own sales network

Source: Submission to the Enquiry from Szerencsejáték Zártkörűen Működő Részvénytársaság

Szerencsejáték Zrt. has a number of distributional outlets, such as post offices, newspaper agents, bank branches and charity shops. The number of outlets changed considerably in 2000-2001 due to the discontinuation of on-line sales, but has since remained stable. Between 2001 and 2003 nearly 3,000 outlets were exclusively selling lottery tickets. In 2003 a charity scratch tickets network was developed in addition to the existing one. At the end of 2004 there were 800 charity scratch ticket retailers working at more than 5000 points of sale.

Number of Szerencsejáték Zrt. outlets 2001 – 2004:

Year >>> 2001 >>> 2002 >>> 2003 >>> 2004
Number of outlets >>> 6,115 >>> 6,203 >>> 6,281 >>> 6,750
Number of lottery outlets owned by Szerencsejáték >>> 290 >>> 291 >>> 292 >>> 294

Source: Submission to the Enquiry from Szerencsejáték Zártkörűen Működő Részvénytársaság