Sri Lanka’s casinos crumble under new taxes
FIle photo : Activists last year protesting moves to set up casinos. Pic by Indika Handuwela
Sri Lankan casino owners, first battling anti-casino sentiments from the powerful Buddhist clergy and now unbearable taxes, are seriously considering closing down their business, the Business Times learns from reliable sources.The only two top-end billionaire casino operators are Dhammika Perera’s (Ballagio/Ballys ) and Ravi Wijeratne’s (Stardust/Marina casinos). Mr. Perera’s casino MGM Grand at Bambalapitiya was closed in May this year to convert the building to a “Glass Art Gallery” because of pressure on heavy taxes.
The government removed the casino entrance fee of US$ 100 imposed in an earlier budget but in the latest 2016 budget doubled the annual levy imposed on the business of gaming, other than rujino, to Rs.400 million from Rs.200 million.Casino operators say that while the government is bend on easing out casinos, rujino ( an improved version of popular card game ‘Buruwa’) appears to be promoted according to the budget proposals.The new budget also proposed to amend the Finance Act to make directors and shareholders personally liable for non-payment or any act which is taken to avoid payment of the Casino Industry Levy of Rs. 1 billion introduced in the earlier (interim) budget.On top of it an additional tax at the rate of 25 per cent of income tax liability has been imposed for tobacco, liquor and casino industries.
On the other hand, the present annual levy of Rs.200 million to carry on the business of rujino will be reduced to Rs.5 million.This will increase the number of small rujino centres which are not levying any entry fee from clients and it will become a menace in the long run as it will attract youths in large numbers, sources said. Previously, three illegal rujino game parlours were operated in Colombo with political patronage, and due to opposition the law enforcement authorities raided those places and arrested suspects, but the game is to resume at these very same places.
“The management may be forced to close down our casinos as a result of these heavy taxes and we will be losing our jobs very soon,” several employees working in a Colombo casino told the Business Times.
They noted that around 3000 direct employees working in casinos and 10,000 indirect employees cannot find jobs in other fields easily as most of them were in this sector for long periods and they have no other job experience.Indians and Chinese are the main patrons, together contributing about 40 per cent of the revenue at these casinos. The remaining 56 per cent is generated from other foreign nationals and a few wealthy Sri Lankans.The annual levy from casinos had been increased to Rs.100 million by the previous Rajapaksa regime as the then government has planned to establish a leisure and entertainment zone at Colombo’s D.R. Wijewardena Mawatha allowing the casino owners to expand its current single location into mega size casinos.
The plan was to accommodate five times the existing capacity and on par with casinos found in Las Vegas or Macau as against having multiple and smaller locations. Under this set up mixed development projects with existing casinos were launched by Queensbury Leisure Ltd, Lake Leisure Holdings (Pvt) Ltd and Waterfront Properties Ltd, a project by John Keells Holdings.In 2010, a highly contested casino bill was passed to bring the handful of small casinos, then operating, under a new licensing system and tax them.The aim was to transform four existing casinos to large scale casino resorts, once the new mixed development projects were ready, a senior government official said.
The three properties were to be clustered around Beira Lake, an urban tourism area that developers planned to transform into leisure and entertainment district the likes of Singapore’s Clarke Quay, he disclosed. James Packer’s Crown Resorts, Australia’s leading casino operator made a deal with local casino operator Mr. Wijeratne to build a $400 million, 450 room casino hotel. Mr. Perera at the time had planned his own $350 million casino resort.With casino operators introducing million dollar construction plans, the then government proposed additional casino licenses, but backed down in the face of widespread protests from Buddhist clergy, hard-line politicians and the public, he added.
Now with the introduction of heavy taxes from casino owners for each of their gaming centres, they will have to close down their gaming business , top management person of one of those casinos said.However, according to Inland Revenue Department (IRD) sources, the net profit of those main casinos is in the region of Rs. 100 million a month and it is not difficult for them to pay the taxes and continue their business.
IRD sources revealed that casinos are paying taxes regularly without defaulting and one such casino owner has paid Rs 100 million per annum for the period between 2013 to 2015 as per the Betting and Gaming Levy Act, 19 of 2013. However casino operators expressed their concern on new taxes claiming that it will affect their business and the tourism industry in the long run. Sri Lanka’s casino was started in the early 1980’s with the entry into this business by famous Aloysius Mudalali and business tycoon Joe Sim, dubbed ‘casino king’.