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Monday, October 25, 2021

Betting regulations should consider consequences

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On January 24, 2017, the Government issued Decree 06/2017 on betting for horse races, dog races and international soccer matches. Due to some legal constraints, this decree has not been implemented and no enterprise has been licensed to carry out betting activities. Recently, the Ministry of Finance has started to gather feedback on the revised decree.

Neither Decree 06/2017 nor the revised decree includes a clause that protects Vietnamese against the detrimental impacts of betting in particular and legalized gambling in general.

Betting, regardless of its legal status, is a form of gambling, which will leave detrimental impacts on bettors, their family members and society. Consequently, citizens should be discouraged from gambling and there must be measures to address the deleterious effects of gambling.

Some countries have managed to strike a balance between legalizing gambling for economic development and safeguarding citizens through specialized organizations and measures aimed at handling gambling-related matters. In particular, in Singapore, agencies such as the Ministry of Family and Social Development and the National Council on Problem Gambling have been tasked with supervising gambling businesses.

In Vietnam, regulations such as Decree 03/2017 on casinos, Decree 06/2017 and the revised decree have not included clauses on how the authorities will supervise these activities. Competent agencies seem to focus on helping enterprises and benefiting the State without adequate attention to the social costs that legalizing gambling may engender.

Disparity

Decree 06/2017 covers horse races, dog races and international soccer matches. While betting on international soccer matches is allowed, that on domestic soccer matches is not. Conversely, while betting on domestic horse races and dog races is allowed, that on international horse races and dog races is not.

If the higher possibility of match fixing in the local soccer scene, compared with that in overseas tournaments, is cited as a reason for banning bets on domestic matches, then how can the disparity in how local and overseas horse races and dog races are treated be explained?

Likewise, the decree and related documents do not explain why betting on other activities such as auto races, local or otherwise, is not allowed. With the introduction of F1 races in Vietnam, will a new decree be required?

Inconsistency

Compared with Decree 03/2017 on casinos, Decree 06/2017 and the revised decree differ in penalties. In particular, Decree 03/2017 includes penalties on violations pertaining to casino business certificates but the other two decrees do not.

Sometimes, penalties on the same offense diverge. For example, if the casino business certificate is tampered with, Decree 03/2017 imposes a fine of VND40-60 million while Decree 06/2017 imposes a fine of VND90-100 million. However, many other penalties are similar in both decrees. Does the Ministry of Finance think that this particular offense is much more serious in the casino business and warrants harsher penalties? It is important for this ministry to review regulations to ensure consistency and fairness.

Sector-specific tax

Betting is a form of gambling regardless of its legal status, so a special tax rate that surpasses the normal rate should apply, at least to discourage citizens from gambling. This is the approach adopted by countries such as Singapore, where tax rates are usually low(1).

In Vietnam, tax and fees applicable to betting are said to adhere to prevailing regulations and the Ministry of Finance’s guidelines, as stipulated in Decree 06/2017 and the revised decree. There are two possibilities. It does not make sense to apply the same tax and fees to betting when they should be higher than usual.

If the Ministry of Finance wants to adopt a sector-specific tax and fee regime, which is in the planning stage, has been implemented or is about to be carried out, this should be stated clearly in related documents. This will not only ensure transparency but also pave the way for selected firms to submit bids to become pilot firms in this sector.

As the Ministry of Finance says, the quotation must be detailed, clear and transparent in terms of requirements, so that contractors can prepare investment and business proposals as part of their bids. The winning bid must be selected according to such criteria as contribution to the State’s budget, apart from tax obligations in line with prevailing regulations, to ensure social security. Public disclosure of the tax and fee regime applicable to betting will enable enterprises to embark on their cost and benefit analysis, weighing revenue and profit against fees and financial obligations they must fulfil, to come up with suitable bidding prices for the Ministry of Finance to select.

(1) https://uk.practicallaw.thomsonreuters.com/4-636-0616?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1

By Chau Phan

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