Fortuna threatens Czech government with Malta move unless gambling tax is not shelved

One of the Czech Republic's most profitable businesses has threatened Prague's right-leaning Prime Minister Petr Necas that it will shift its entire operation to Malta, unless his government removes a new tax on Czech-based companies that run betting shops and online betting operations.

The tax was implemented last January as part of Prime Minister Necas' efforts to comply with European Union rules to reduce the country's fiscal deficit to no more than 3% of gross domestic product next year.

The tax imposes a whopping 20% tax on gross gross wins on top of a corporate tax of 19%.

Fortuna Entertainment Group NV, considered to be the largest central European betting operator has openly challenged this tax, and has publically threatened the Czech government that it would shift all its operations to Malta if the tax was not removed.

Of Fortuna's overall tax bill, an estimated €2.5 million was the tax paid on gross wins alone, Fortuna's Chairman Wilf Walsh said.

"The tax issue raises a question of how resilient this business is," Walsh said, noting that during the first six months of 2012 the company posted a 15% annual increase in gross wins and a 10% annual increase in revenue from bets and lottery. But despite those gains, net profit fell 35% on year largely due to the gambling tax.

Fortuna has already established Maltese operations, and is ready to switch all operations to the island.

Walsh said that by moving to Malta - which is not the company's preferred option - it would lead to a lower tax bill and would protect shareholder value while increasing the probable dividend payout.

"If the situation doesn't improve by the next Annual General Meeting of shareholders,we [will] propose to shareholders to move...operations to Malta," he said.

The next AGM will likely take place between April and July of 2013, said Klara Klimova, Fortuna's investor relations consultant.

"In case taxation worsens, we have a safe haven where to move," Fortuna's chairman said.