In the first five months of this year online gambling companies paid four times more taxes than in the entire year of 2022. Tax payments as of June 1, 2023 amounted to over UAH 2.2 billion. For comparison this amount did not exceed UAH 550 million for the whole of 2022.

This increase in revenues to the State budget of Ukraine is the result of coordinated cooperation between the Economic Security Bureau, the Security Service of Ukraine, the Prosecutor's office and the NBU to identify tax evasion schemes through manipulation of payments and concealment of their real purpose.

Mostly it is the so-called misdirection* when a related payment code is indicated instead of the one related to gambling transactions which results in much lower taxes. As a result, online casinos paid only UAH 34.5 million in taxes in 2021. In 2022, it was already UAH 549.7 million as the ESBU investigation began and tax payments increased rapidly at the end of the year.

The misdirection scheme was organized by officials of a number of banks, with approximately UAH 20 billion flowing through the main one. In March 2023, the National Bank of Ukraine decided to revoke the licenses of two banks and liquidate them.

The Main detective unit of the ESBU is investigating criminal proceedings under four articles of the Criminal Code of Ukraine:

• part 3 of art. 212 (tax evasion on an especially large scale);
• part 2 of art. 203-2 (illegal activities in the organization or conduct of gambling);
• part 1,3 of art. 209 (legalization (laundering) of the proceeds of crime);
• part 2 of art. 229 of the Criminal Code of Ukraine (illegal use of a trademark).

In June a forensic economic examination was completed which established that the amount of unpaid tax payments by the companies involved in the scheme amounted to more than UAH 1.3 billion.

As part of the pre-trial investigation, more than 20 searches were conducted in banking institutions and related companies, financial documents were seized, and more than a thousand accounts were checked. Corporate rights of the companies and funds on their accounts totaling UAH 391 million were seized.

Detectives of the ESBU sent appropriate appeals to the National Bank of Ukraine and the Commission for regulation of gambling and lotteries to take the necessary measures to prevent further tax evasion. The State Tax Service of Ukraine was also informed of the violations to prevent such schemes from operating in the future.

Due to the collected evidence of illegal activities some betting companies and online casinos ceased operations due to the loss of licenses and the imposition of sanctions while others began to be more conscientious about paying taxes. As a result in five months of 2023, UAH 526.7 million was paid in income tax from betting and online casinos alone while total tax payments exceeded UAH 2.2 billion.

*Miscoding is manipulation of the payment transaction coding.

In this case funds from illegal activities related to the organization or conduct of online gambling are transferred to the settlement accounts of the involved banks or electronic wallets with a Merchant Category Code (MCC) other than MCC 7995 which is used to code gambling transactions. This allows licensees and involved companies to conceal the real purpose of online casino gambling transactions and evade taxes.