Economics of Gambling in Malta

Since the introduction of the first on-line betting licences in 2000, the Maltese Lotteries and Gaming Authority (LGA) has developed its methodologies to regulate the procedures of remote gaming operations, and in April 2004, revamped Remote Gaming Regulations were published. Malta became the first EU member state to regulate Remote Gaming. The definition of remote gaming is technology-neutral, encompassing any type of gaming using a means of distance communication (including internet, digital TV, mobile phone technology, telephone and fax).

The sector dynamics of remote gaming coupled with the technology convergence created the need for re-modelled regulatory framework and as a result the LGA has ended the second Phase of new draft regulations of Remote Gaming. These should be published in 2006. As of May 2006, the Lotteries and Gaming Authority had processed over 150 remote gaming licenses.

Detailed procedures relating to control systems, gaming systems and the financial protection of players, are intended to create an environment where licensees can work virtually free from any grey areas. Licensees can apply under one or more of the four classes of licenses. Regulation is based on the principle of creating a controlled environment that can be readily monitored and kept in check. On the other hand, operators want to see tangible proof of the benefits of regulation.

Under the Remote Gaming Regulations, servers must be located in Malta. In practice, this means that the systems of internal controls, administrative and accounting procedures, including the processes to accept the stake and the bet and conclude the transaction, have to be in Malta. Accordingly, it has been ensured that the Lotteries and Gambling Authority has full access to and thorough control over the critical systems of the licensees.

Anti-money laundering provisions are strictly enforced. Malta wants to ensure that all licensed gaming is untainted by criminality. As of 2005, the Lotteries and Gambling Authority had issued sixty remote gaming licenses.

Number of remote licenses issued:

Class > Number of licenses
Class 1 > licenses 17
Class 2 > licenses 31
Class 3 > licenses 6
Class 4 > licenses 6

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

Class 1 gaming licenses are distributed to companies that provide online casino-style games, games of chance, and games that use a random number generator. Class 2 licenses cover operators of online sports books and betting exchanges. Companies that promote and advertise on behalf of gaming companies from Malta are covered by a Class 3 license with any company that hosts or manages an online gaming operator (excluding the licensee) required to have a Class 4 License. Organisations may apply for one, all, or any combination of the four licenses.

To qualify for a license, an applicant must be a limited liability company registered in Malta. The initial fee for issuing a license for each of the four classes has been set at MTL 1,000 (€2,300). Licensed companies are then required to pay an annual fee of MTL 3,000 (€6,900), with the cost of renewal at the end of the five-year term being MTL 500 (€1,200). Renewal applications must be made in the form specified by the Lotteries and Gaming Authority and should be received at least 60 days before the expiration of the existing license.

The Maltese license allows online companies to operate in a global market place offering a product portfolio consisting of betting, casino, poker, totalisator, lotteries and soft games. All Internet gaming licensees are liable to pay the Lotteries and Gaming Authority on behalf of the Government MTL 2,000 (€4,600) per month during the first six months after issue of the license and subsequently MTL 3,000 (€6,9000) per month for the entire duration of the license period. If a site is operated by a Class 4 Remote Gaming licensee, the licensee who operates the hosting platform does not pay any tax for the first six months after the issue of the license and then MTL 1,000 (€2,300) per month for the subsequent six months and subsequently MTL 2,000 (€4,600) per month for the remainder of the duration of the license. Licensees operating from the hosting platform are liable to pay MTL 500 (€1,2000) per month. The gaming industry does not pay any VAT on their services in Malta.

GGR of the Gaming Sector for 2003 in Euros:

Online Betting > Land-based Casinos > Land-based Lottery > Land-based Betting > Land-based Bingo > TOTAL
65,922,693.82 > 23,088,704.52 > 23,125,038.05 > 0.00 > 1,267,202.18 > 113,403,638.57

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

GDP of Malta for year 2003 was 4,168,202,576.20 EUR (ESA 95). So the GGR as a % of GDP is estimated to be approx. 2.72%

Expekt.com is a good example of a Malta internet-based gambling company. It is one of the top ten online gaming companies on the European market and the largest one in the Scandinavian market with a gaming turnover of about €1,4 billion in 2004. Their gaming turnover (on stakes) for the last four years is below, most of which came from EU countries.

Expekt.com turnover:

2001 > 50 € MILLION
2002 > 80 € MILLION
2003 > 330 € MILLION
2004 > 1,370 € MILLION

Source: Submission to the Enquiry from the Expekt.com

Their Maltese class 4 remote gaming license requires them to pay 0,5 % tax on accepted bets to a maximum of 200.000 MTL (about €465,000) per annum. In addition, a fixed fee for casino, soft games and lottery through a license of 500 MTL/month (€1,200) needs to be paid. Also, for the Maltese license the following fees apply:

Application fee: 1,000 MTL (€2,300)
License fee: 3,000 MTL/annum (€7,000)
Renewal fee: 500 MTL (€1,200)

Expekt.com’s companies, as of 2005, employed 94 people. During the last five years they had the following number of employees:

Number of People employed in Expect.com:

2001 > 15
2002 > 30
2003 > 51
2004 > 65
2005 > 94

Source: Submission to the Enquiry from the Expekt.com

GAMING SECTOR ANALYSIS

Lotteries

In 1922 the Maltese Lotto Act was first enacted. Between 1999 and 2003 the National Lottery consisted of five games (Lotto, Grand Lottery, Scratch Lottery, Tiritombla and Super 5). In April 2004 the National Lottery was privatised and a license awarded to Maltco Lotteries Ltd. The license is exclusive for a period of seven years. The company is 73% owned by Intralot, with local Maltese businessmen owning the remaining 27%.

The company will operate existing games, such as Lotto and scratch tickets and will also introduce sports betting, keno and other number games. Maltco also plans to offer its games via alternative networks. Intralot will invest approximately €30 million including €18.5 million on a license fee. The company will install an online network in Malta using its Coronis terminals and Lotos software.

Aggregate Annual Gross Gaming Revenue Paid before Privatisation (1999 – 2003)

YEAR > Agg. Annual Gross Gambling Revenue (LM) > Agg. Annual Gross Gaming Revenue (Euro)
1999 > 10,602,502 > 24,709,449
2000 > 9,298,339 > 21,670,058
2001 > 10,327,523 > 24,068,602
2002 > 9,932,947 > 23,149,031
2003 > 10,248,469 > 23,884,364

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

Casino Gaming

Currently there are three licensed casino operators on the Maltese island: Dragonara Casino (first licensed operator); Oracle Casino, and Casino di Venezia. The casino licenses are issued for a ten year period. At present, the license fee is 20,000 Maltese Liri (€69,000) per year, which is payable to the Authority.

The gaming taxes vary between casino table games and gaming machines. Table Games are taxed at 36% of total gross gaming revenues of all table games played at the casino and at 15% of the gross gaming revenues on all table games dedicated to the junkets.

The gaming machines are taxed at 40% of total gross gaming revenues of all gaming machines played at the casino and 25% of the gross gaming revenues on all gaming machines dedicated to the junkets.

Aggregate Annual Casino Gross Gambling Revenue 1999 – 2003:

YEAR > Agg. Annual Gross Gambling Revenue (LM) > Agg. Annual Gross Gaming Revenue (Euro)
1999 > 5,327,212 > 12,415,227
2000 > 7,314,190 > 17,045,939
2001 > 7,050,042 > 16,430,334
2002 > 9,232,912 > 21,517,578
2003 > 9,984,368 > 23,268,869

Note: For casinos ‘Aggregate Annual Gross Gaming Revenue’ is comprised of the winnings from tables, slot machines and junkets.

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

The three casinos are situated in different parts of the island and are of paramount importance to the entertainment and gaming industry in Malta. They engage a large number of employees and are a significant source of foreign investment. The casino operators are licensed and regulated under the Gaming Act 1998 and Gaming Regulations 1998 by the Lotteries and Gaming Authority of Malta.

The International Casino Dragonara Palace was initially operated by Accor Casinos, but since Accor Casinos joined with Lucien Barriere in 2005, the casino is now operated by Groupe Lucien Barriere. The Dragonara Casino offers 174 slots and 21 tables, as well as a 12-seat Royal Ascot mechanized horse racing facility. The Italian-operated Casino di Venezia includes 49 slots and 14 tables and the Oracle Casino, operated by Malta’s Tumas Group, offers 133 slots and 20 tables. Altogether, there are approximately 55 tables and 256 slot machines in casinos in Malta.

In addition there are now plans for a more up-market waterfront casino property. The Lazzetto Casino and Entertainment Destination is to be developed on Manoel Island in a 17th century quarantine hospital. The 17th century fort is to be developed as a cultural, arts and culinary destination which will also include restaurants, retail areas, seminar and conference facilities, a health club, leisure facilities and possibly a spa. It is estimated that the development will be completely operational by 2012.

According to Section 20 of the Gaming Act 1998 and Gaming Regulations 1998 no person is permitted to be employed or work in a casino as a casino employee, casino manager, or junket leader, unless they are in possession of a license granted by the Authority. The three casinos currently engage 376 employees.

Machine Gambling Outside Casinos

Amusement games and amusement machines will eventually be regulated by regulations drafted under the Lotteries and Other Games Act, 2001. All present amusement machines are regulated by Legal Notice 43 of 1988.

Regarding Video Lottery Terminal (VLT) Games, preliminary draft regulations have been finalised by the Lotteries and Gaming Authority of Malta and submitted to the Government for its consideration. Various categories in the supply and operation chain will be licensed.

Betting

Since the passing of the new legislation, the Maltese Lotteries and Gaming Authority is now able to grant a license to an approved racing club to operate racecourse bets on horse races and sweepstakes in connection with horse races. Article 42 of the Lotteries and Other Games Act 2001 (Fifth Schedule), that is not yet in force, deals with Racecourse Bets and Sweepstakes. Article 42(1) defines the method of operating and playing a sweepstake. According to Article 42(2) a racecourse betting license remains in force for one year after the date of issue. To date racecourse bets and sweepstakes are regulated by the Racecourse Betting Ordinance. Prior to the legislation, Malta did have a small betting industry based around activities at the Marsa Race Track and a handful of black market off-course facilities. (Source: GBGC Report)

During the autumn of 2000 the Maltese Government passed legislation enabling online betting centres to be established. A large number of companies from around the world expressed interest in Malta, with approximately 20 licenses being issued with more being processed, despite there being an initial concern that the abolition of the deduction in the UK and the reduction of betting tax in Ireland would ultimately cause a mass bookmaker exodus from the island.

Internet betting operators are subject to a 0.5% tax on handle, with betting exchanges paying 0.5% on the sum of all net winnings calculated per player per betting market. On pool betting, the online tax rate is equivalent to 0.5% on the aggregate of stakes paid. The ceiling on tax payable per annum with respect to any single license is MTL 200,000 (€466,000). Companies who are granted a Maltese license are not permitted to take bets from the island’s citizens.

Bingo

Currently there are four Bingo operators in Malta. The first bingo hall started its initial operations in April 2001. Two more bingo halls opened in year 2002, whilst the fourth bingo hall started its operations in May 2004.

The new Commercial Tombola (BINGO) Regulations 2005 were still awaiting Government approval toward the end of 2005. To date, commercial bingo halls are regulated by Tombola (Bingo) Regulations 2000, under the Public Lotto Ordinance. However, the new regulations are expected to permit two classes of licenses:

– Class 1 Tombola (Bingo) Hall License with a seating capacity of not less than one hundred and fifty, for a period of one year.
– Class 2 Tombola (BINGO) License with a seating capacity of not less than one hundred and fifty, for a period of six months.

The license paid on a submission of an application, by the licensee to the Authority (only once), for all classes of Tombola (Bingo) Halls is 500 LM. When licenses are approved, the following fees will need to be paid:

– Class1 – 12 000 LM per annum;
– Class 2 – 7 000 LM for every six calendar months.

In addition, all classes of Tombola (Bingo) Hall Licensees have to pay gambling tax:

– On the value of the scoresheet – ten per cent (10%)
– On the total revenue from entrance fees – thirty per cent (30%)

At least 60% of the revenue from the sale of score sheets has to be allocated to prizes. The commercial bingo halls are currently subject to gaming duty of twenty (20) per centum on turnover.

Total Bingo Duty Paid 2001 – 2004 (LM):

Year > Duty
2001 > 48,345
2002 > 130,183
2003 > 175,457
2004 > 242,403

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

Bingo Gross Gaming Revenue 2001 – 2004:

Year > Agg. Annual Gross Gambling Revenue (LM) > Agg. Annual Gross Gaming Revenue (Euro)
2001 > 96,692 > 225,344
2002 > 260,367 > 606,793
2003 > 362,598 > 845,046
2004 > 484,807 > 1,129,857

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

For commercial bingo halls the ‘Aggregate Annual Gross Gaming Revenue’ is considered to be money staked, less money paid out in prizes or winning. The figures reflect the aggregate performance of the four bingo halls operating in Malta.

Although it is too early to carry out any sort of analysis to forecast the future turnover, the above figures indicate that the aggregate revenue has been steadily on the increase. Moreover, new companies have applied for licenses to operate bingo halls in Malta which imply positive expectations for future growth.

Bingo establishments employ 47 full-time employees and 40 part-time employees.

Media Gambling Services

The Broadcasting Media Games are regulated by the Lotteries and Other Games Act 2001, but the relevant provisions are not yet in force.

Director of Public Lottery (DPL) Permits (Advertising/Private Lotteries) 2000 – 2004:

Year > Value of Prizes (LM) > 25% Duty > Prizes of Exempted Permits (LM) > Duty Waived (LM)
2000 > 187,579 > 46,894 > 67,260 > 16,815
2001 > 114,458 > 28,614 > 74,098 > 18,524
2002 > 93,404 > 23,351 > 103,031 > 25,757
2003 > 195,049 > 48,762 > 81,141 > 20,285
2004 > 138,370 > 34,592 > 80,535 > 20,133

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

Sales Promotional Gambling

Commercial Communication Games are envisaged in the Lotteries and Other Games Act, 2001, but the relevant provisions are not yet in force.

Charity Gambling

The provisions of the Lotteries and Other Games Act, 2001 relating to non-profit games arenot yet in force. At present, small and non-profit games fall under the Public Lotto Ordinance.The entities eligible for operating small games are philanthropic entities, sports associationsand religious entities. If the prize fund does not exceed fifty Maltese liri (50 LM), the game isexempt from duty. If the prize fund exceeds 50 LM, the respective entity is required to obtaina DPL (Director of Public Lottery) permit from the Lotteries and Gaming Authority, in order tooperate the game. In future they will be regulated by the Lotteries and Other Games Act,2001 and exempted from licensing requirements.

Non-profit Organisations Duty Paid Under The Provisions of the Public Lotto Ordinance (ML):

2004 > September > October > November > December > Number of Sessions/Games > TOTAL DUTY (70% refundable)
> 825 > 1,365 > 1,320 > 900 > 295 > 4,425

2005 > January > February > March > 12-Apr > Number of Sessions/Games > TOTAL DUTY (70% refundable)
> 795 > 1,095 > 705 > 405 > 200 > 3,000

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

Total Duty 30% Paid After Refund of 70% 2004 – 2005 (partial years):

2004 > 2005
1,327 LM > 9,00 LM

Source: Submission to the Enquiry from the Maltese Lotteries and Gaming Authority

NATIONAL SUMMARY

Year > Total (€ million) > Lottery (€ million) > Casino (€ million) > Gaming Machines (€ million) > Betting (€ million) > Bingo (€ million)
2001 > 143.11 > 24.07 > 16.43 > 0 > 102.39 > 0.23
2002 > 124.05 > 23.15 > 21.52 > 0 > 78.77 > 0.61
2003 > 113.92 > 23.88 > 23.27 > 0 > 65.92 > 0.85