Turkish lottery privatized at the expense of public and treasury

A businessman close to President Erdoğan and a multi-billion dollar wealth fund controlled by the presidency have been the main beneficiaries of a controversial move to privatize the country's national lottery, which holds a monopoly over any chance-based games.

Tuesday March 30 2021 11:44 am

K. Murat Yıldız / Duvar English

The Turkish National Lottery Administration (MPI) was established in 1939. The leadership of the body was transferred to the Turkish Wealth Fund (TVF) headed by President Recep Tayyip Erdoğan in 2017 via an executive order. Two years after this transfer, the MPI has been privatized starting in 2019 for a 10-year period.

Previous moves to privatize the lottery administration by former governments did not materialize, including a ruling Justice and Development Party’s (AKP) attempt in 2008. Bidders at that time failed to meet the government's 1.6 billion dollars valuation of the MPI.

A recent tender was won by Sisal Şans, a joint venture of the pro-government Demirören Group (51%) and Italian Sisal S.p.A. (49%).

The Turkish partner and majority share holder of Sisal Şans, the Demirören Group established in 1956, established itself within Turkey's energy industry but became a pro-government media giant after obtaining major Turkish news outlets, including Hürriyet and CNN Türk.

Pro-government company wins tender

Founder and late owner of the group Erdoğan Demirören and his son, the current head of the holding and former president of Turkish football clubs Beşiktaş JK and Turkish Football Federation, Yıldırım Demirören, have been close allies of President Erdoğan and have played a role in silencing dissent in Turkish media via takeovers of media outlets, firing of opposition voices, and shutting down newspapers.

Due to the Demirören family's proximity to President Erdoğan and their handling of media outlets, their ownership of the national lottery body was heavily criticized by the opposition and was seen as a reward to the family for their pro-Erdoğan position.

After a delay due to the COVID-19 pandemic, in August 2020, Sisal Şans obtained exclusive rights from the MPI over carrying out lotteries, the selling of scratch-off tickets, etc.

According to its annual reports, the MPI made 2.8 billion liras in 2019 alone, 46 percent of which was taxed and transferred to the treasury, while 1.4 billion liras were channeled to other government institutions and social services in the year before it was privatized.

Extorted tax money

Another controversy emerged as main opposition People’s Republican Party (CHP) deputy Deniz Yavuzyılmaz made public that the Wealth Fund would not transfer the 18 percent tax from lottery games to the treasury.

“Before its privatization, the MPI used to transfer an 18 percent Value Added Tax (VAT) plus a 10 percent Gambling Tax to the treasury. Today people still pay 18 percent VAT for the games, but this money is being channeled into the wealth fund via a tax exemption. They are extorting money from the people,” MP Yavuzyılmaz told Duvar English.

New taxes imposed after privatization

After the takeover by Sisal Şans, a new 20 percent tax was imposed on winnings above 7,060 Turkish liras (873 USD). This money is also being channeled into the Erdoğan-controlled wealth fund.

“The prize money they announced for the New Years National Lottery was 100 million liras, but due to this newly-imposed tax, it was 80 million liras. Even here they were not telling the truth to the people,” Yavuzyılmaz stated.

Parliamentary inquiry

On March 25, the CHP submitted an inquiry to parliament calling for an official investigation into Sisal Şans’ practices and its relation to the wealth fund, noting that its official agreement with the government has not been made public.

“We will bring the issue to the parliament floor as soon as possible,” CHP deputy Akif Hamzaçebi, who wrote the parliamentary inquiry, told Duvar English.

He added that the MPI used to transfer a large amount of its profit to other institutions and government funds such as the Olympic Games Fund (5 percent of its annual profit), Defense Industry Support Fund (95 percent of its annual profit), Directorate General of Child Services (1 percent of its monthly turnover), but that it has stopped doing so. “Now all its revenue goes to the wealth fund,” he concluded.