Tuesday, 17 September 2013 01:02
Calls for clear cut licensing regime and appointment of regulator
Urges Government to apply high Asian taxation models to emerging mega gaming industry; if implemented estimates revenue from casino taxes could eliminate Rs. 34 b worth of taxes on food items
Recommends engagement with religious leaders, civil society and safety nets against negatives spilling over to larger society
UNP MP and its Chief Spokesman on the economy Dr. Harsha de Silva yesterday urged the Government to come clean on its overall stand on the casino industry, given the massive plans by private sector.
“A well-regulated, licensed and taxed casino industry is recommended if the Government wishes to promote casinos despite assurances to create a just and values-driven society. However, at present we have unregulated, unlicensed and untaxed casino operations,” the UNP MP claimed.
He argued that though four or five casinos are operative, as per the Casino Business Regulation Act No. 17 of 2010, they are illegal. The reason being the Act stated that none can engage in casinos from 1 January 2013 unless having a valid licence issued by the subject minister. Dr. De Silva said so far no one has been issued with this licence nor a regulator appointed as per the Act.
Dr. de Silva’s comments were in response to Cabinet last week approving integrated resort projects (inclusive of casinos) with a combined investment value of $ 1 billion by Australian gaming mogul James Packer and his local partner Ravi Wijeratne, and John Keells Holdings (JKH) and announced expansion plans by Vallibel Holdings (Queensbury with a $ 350 million investment) as reported in the Daily FT yesterday.
The UNP MP said that he wasn’t against casinos but such operations must be confined to a designated area away from the city in addition to the Government maximising tax revenue.
“Casinos are highly detrimental to society as there are several negative externalities, including crime, prostitution and drugs. If it wishes to, the Government should look at establishing mega casinos out of the city. Why not in Mattala (which can also bring in flights to the airport there) or in the proposed reclaimed city outside Colombo Port?” queried Dr. de Silva.
He was of the view that the Government needs to be sincere and transparent and engage civil society and religious groups in formulating a social contract with people to ensure casinos don’t destroy society.
“If casinos are promoted, then the Government must ensure they are well-regulated and taxed appropriately so that revenue can be channelled for people’s welfare. Given the proposed concessions for integrated resorts, this objective won’t be realised,” charged Dr. de Silva.
He said that compared with 40% tax on gross gaming revenue in Macau, 22% + corporate tax in Singapore, or 27% + corporate tax in the Philippines, what is proposed in Sri Lanka is absurdly low.
Citing that Macau is estimated to generate revenues of $ 45 billion via casinos in 2013, Dr. de Silva said if Sri Lanka secures 5% of this volume, it would mean a staggering $ 2.25 billion or Rs. 303 billion. If a 40% tax is applied on gross gaming earnings, the income for the Government will be Rs. 121 billion or if a 40% tax is applied on profits, it could amount to Rs. 58 billion.
“In 2012, the public faced a Rs. 34 billion tax on foods. If the Government can impose higher taxation on casinos and remove taxes on food, the people will have considerable relief,” the UNP MP argued.
Quoting President Mahinda Rajapaksa’s 2011 Budget, he said that the income tax on casinos was increased to 40% and it must be persisted with despite integrated resorts qualifying for approval under the Strategic Development Act.
“I am not personally attacking Dhammika Perera, James Packer or Ravi Wijeratne, but there must be equitable taxation in the country. However, the President Mahinda Rajapaksa regime is letting casino billionaires become richer without collecting the desired taxes for the benefit of the masses,” Dr. de Silva alleged.
He also said that the appointment of a regulator was necessary if the Government wanted to go ahead with casinos. “There must be a clear-cut licensing regime and a regulator that will specify licensing criteria, pricing, operational guidelines and penalties if laws are violated. The Government must table this at the next sitting of Parliament. If not we will continue our agitation,” the UNP MP said.
He said UNP’s consistent campaign has garnered lot of support on the casino issue including from an otherwise politically opposing JHU apart from DNU and JVP. “The chorus against the Government’s casino agenda is growing and the Government better take serious note and make adjustments,” he added.
De Silva also welcomed assurances reportedly given by Cabinet Spokesman and Media Minister Keheliya Rambukwella that casinos would be brought under the normal corporate tax law of the country.
However, the Daily FT last week reported Minister Rambukwella as saying that the two projects, which have been given significant concessions by the Government, would go ahead. He also reiterated that the Government would not issue new gaming licenses.
“All this has been explained before. The Finance Ministry together with the Excise Department has issued these licenses and the gaming section of the integrated projects will be taxed,” Rambukwella added.
A copy of the Gazette notification obtained by the Daily FT showed that in addition to the 10-year income tax holiday, integrated resorts will be charged only 6% tax for another 12 years. It also details exemptions from Customs Duty, Construction Industry Guarantee Fund Levy, Port and Airport Development Levy, V.A.T, PAYE tax for foreign employees (five years), Withholding Tax on foreign loan interest and Tax on Dividends for 11 years.
However, they will be subject to the Betting and Gaming Levy Act No. 40 of 1988 as amended subject to the prevailing rate on the gross collections (being the amounts collected from customers) excluding the customised cost of incentives/discounts and associated costs, including taxes, in attracting the customers.