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President of Russia Dmitry Medvedev: I have just met with A Just Russia. They raised the question about the rules relating to gaming activities and to gambling more generally in Russia, since from July 1, 2009 the maintenance of these games and engaging in betting activities will proceed on a completely different basis. In other words, those facilities that have existed up to this point are to be closed. We will create four zones in which gambling will be carried out in the future.

This is what I want to say in this regard. First, it is indeed true that new rules are about to come into force on July 1. They will not be revised in any way and there will be no backsliding, although various business organisations have been lobbying for precisely this. This is the official government position.

Second, I would like you to report on how our tax service is prepared to implement and monitor gambling after the new rules take effect, how this will affect federal revenues, and just where you see problems or decisions that will have to be made. Please go ahead.

Federal Taxation Service head Mikhail Mokretsov: The process of closing down these businesses is proceeding apace. During the first four months of this year the number of businesses involved in organised gambling decreased by 42 percent. The number of existing gambling establishments has fallen by 43 percent. In terms of revenues, the difference that this will make for regional budgets is negligible.

Dmitry Medvedev: Roughly how much does this represent in relation to total revenues? I know this is just an approximate figure, but nonetheless.

Mikhail Mokretsov: Regional budget revenues from gambling amount to only 0.6 percent.

Dmitry Medvedev: In other words, it is insignificant even at a time of financial crisis.

Mikhail Mokretsov: That is absolutely right. In addition, six regions of the Russian Federation provide 56 percent of these revenues, namely Moscow, Moscow Region, Samara, Yekaterinburg and Krasnodar regions. And St Petersburg. The others receive revenues that amount to less than 1 percent of the regional budgets. For them, this amount is completely insignificant.

Dmitry Medvedev: And what are the figures for the big cities?

Mikhail Mokretsov: In large cities the numbers are also very small, just a tenth of a percent, because the budgets …

Dmitry Medvedev: The budgets are big, so even for their consolidated budgets we are still talking about small amounts.

Mikhail Mokretsov: A very small amount, so revenue is not the crucial issue. In recent years these budget revenues have declined, as have the number of businesses and the number of employees. We are often asked how many people are employed in this business. The statistics show that the number is no more than 60,000 people. And it is easy to tinker with such figures. Usually what is meant is related businesses.

Dmitry Medvedev: First of all, this does include related businesses. Secondly, we are determined to strictly organise these activities – not close them down in Russia, but rather set up special zones where gambling will be permitted. As soon as they settle down there they can do as much gambling business as they want. And now the process has been set in motion. I understand that people have already been allotted parcels of land and started work on construction in some places. So I think that we will also be able to handle the social consequences that result from changing the rules concerning gambling.

Mikhail Mokretsov: Yes, the Federal Taxation Service is ready to manage the business in these zones. We can organise such management either through special inspections or special units that we can put together in the relevant regional offices. We know about this as this was China’s experience: we have studied carefully what they did and it should work effectively.

Dmitry Medvedev: There is another issue. We are frequently asked if this change of rules and the introduction of a more rigorous approach to the conduct of the gambling business in our country could result in some of this business simply going underground. What do you think about this?

Mikhail Mokretsov: I think that the regions should have their say here, since under the Federal law control lies for the most part with the regional authorities. For example, at present 22 regions of the Russian Federation have banned such activities because the law gives them this right; 27 regions have now restricted it. And they have different instruments at their disposal, including law enforcement agencies, to detect such activities and take action against illegal ones. The organisers of this business run very serious risks, because these activities have been classified as illegal and accordingly the penalties are very serious.

Dmitry Medvedev: So in other words any gambling activities that do not have a state permit will be treated as a crime.

Mikhail Mokretsov: That is absolutely right.

Dmitry Medvedev: But along with this such activities may be conducted in designated places, within the zones to be established, according to the rules laid out, and people can keep whatever profits they accrue thereby. It means these activities will be conducted within legal frames set out by the state interests.

Mikhail Mokretsov: Yes – and with the monitoring and assistance of the Federal Taxation Service.

Dmitry Medvedev: Of course, under the vigilant eye of the Federal Taxation Service. Good. Then I would like you to continue to monitor this process, bearing in mind that on June 30, 2009 gambling institutions will close down their operations, and in the next month the map will be completely redrawn. It is your job to oversee this process.

Mikhail Mokretsov: It is.