Big Casinos to control Politics in tiny Island?

3 September 2013 04:17 am - 0     - {{hitsCtrl.values.hits}}

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Gambling sparks controversy wherever it plants its seed, particularly in conservative societies such as ours where it is stigmatized as being ‘immoral’. It comes as no surprise then that the breeding grounds and facility which houses and accommodates gambling is not readily accepted on the basis that it causes social degradation, depreciation of cultural values and increases crime rates.

This is a psyche which is not exclusive to, but more manifest in conservative societies. Such controversy could hardly be expected to elude ‘conservative’ Sri Lanka especially in view of the nationalistic fronts which vehemently oppose the inception of casinos altogether.  There is however some merit in the criticisms levelled on a ‘higher moral ground’ particularly pertaining to the overwhelming social repercussions that may accompany it.

The Political systems of many countries which fall within the categories of ‘small powers’ have been susceptible to the powers that are wielded through the influence wielded by the  owners of Casinos and the sub industries that crop with the industry. The power that can be exercised by the multimillion dollar business moguls on a countries Political system have been researched and documented previously. In a third world country such as Sri Lanka in which corruption is a synonym with Political power there begs a question as to how far the vice would extend after the ‘injection’ of Casinos and its sub industries in the country.

The reports of the Scottish Centre for Social Research in surveys conducted worldwide reveal  that “Casinos do not appear to increase per capita crime, although total crime in a neighbourhood may increase. This seems to be an effect of population growth: casinos tend to attract large numbers of visitors to an area, and casino-jurisdictions can also experience population growth, increasing overall numbers of people in an area who can commit or fall victim to crime”. In the light of the overbearing impact that casinos could cause, a sufficient justification is warranted when the decision to allow it is made.

There is much debate over whether or not the socio-economic consequences of casino gambling outweigh the initial revenue that may be generated. It thereby becomes apparent that the one robust counter argument or justification for inception of casinos is weighted on the basis of income generation to respective governments. It becomes increasingly difficult to defend the position of incorporating casinos in the absence of such a justification.

The Government of Sri Lanka (GoSL) has attracted more criticism in the recent past by granting tax exemptions over a period of 10 years to the ‘Lake Leisure’ Development Project of Australian casino mogul James Packer and the ‘iconic’ Integrated Resort Project of John Keells Holdings.

Following this tax holiday the profits earned by the company would be charged at six percent or 50 percent of the prevailing tax for the hotel industry for 12 years. The dividends paid to shareholders out of the tax exempted profit of the Company would also not be taxed and are exempted from income tax for 10 years. The withholding of tax on interest accrued on foreign loans for capital expenditure, for and technical fees, management fees, royalty fees and marketing fees have also been exempt. This many concessions is a highly irregular practice according to renowned economist Dr. Harsha De Silva who cynically comments that it is a ‘world record’
The question is then posed as to how desirable it would be to have ‘casino zones’ and whether there is sufficient justification to counter the possible socio-economic repercussions that could be incurred to an already indebted and ailing economy.



All major investments have tax holidays

Lakshman Yapa Abeywardene Minister of Investment Promotion


"If Packer went to Singapore he would only have a casino there and that is a completely different issue. Here he is coming for all Mixed Development Projects. His venture will include a 450-room mega complex inclusive of shopping facilities and many other facets, of which a casino will also be a part"


Those who have had casinos in the past as well have had to pay taxes under the Betting and Gaming Act, and they have done so. I can think of 5 or 6 individuals who have gradually paid their taxes under this Act. Under the Strategic Development Act concessions are given to Mixed Development Projects. So the tax holidays given are as per the requirements and allowance of that Act. They award these concessions to all Mixed Development Projects and not just this particular venture.
 Even eminent local business figures all of which have owned or been involved with casinos have paid their taxes under the Gaming and Betting Act. Under the permit they have received under that Act, they have negotiated in their Memorandum of Understanding (MoU) to transfer their places of business to Mixed Development Projects, which under lawful provisions are given such exemptions. If a foreign investor can invest more than 250mn USD then under this Act, such tax holidays are provided for all such investments and not only this particular one.
 If Packer went to Singapore he would only have a casino there and that could be a completely different issue. Here he is coming for all Mixed Development Projects. His venture will include a 450-room mega complex inclusive of shopping facilities and many other facets, of which a casino will also be a part.
 I don’t understand why issues of legality are arising only now.  In the last 30 years even under the UNP these casinos have been in existence and have been taxed under the Betting and Gaming Act. All of this occurred without any licences being issued. These issues never came up at that time, so now why are issues of legality being questioned?



Casinos bring with them more issues than percieved

Champika Ranawaka JHU General Secretary-Minister of Technology research and atomic energy


"Casinos bring with it many problems that are quite clear to anyone, but some of these consequences may be bigger than have been envisaged. It would create drug and prostitution rings, and casino tycoons may hamper the independent governance of the state"


“The JHU is in principle against gambling altogether. In Sri Lanka gambling is currently legal under the Gambling Act. If this is to continue it needs a lot more regulation.
 In 2011the Finance Ministry introduced the Casino Control Act and under this Act by January 1, 2012 the zones in which casinos were allowed were to be demarcated and licence requirements were laid out.
To my knowledge no such zone has been declared nor has any licence been obtained, which makes them illegal. Nevertheless these casinos have got approval and the projects are proceeding without any hindrance which makes it clear that the Act has not been implemented and regulation is not taking place as expected.
Casinos bring with them many problems that are quite clear to anyone, but some of these consequences may be bigger than have been envisaged. They would create drug and prostitution rings, and casino tycoons may hamper the independent governance of the state. Thailand is one country where this is most visible and many of these problems have escalated rapidly because they were so willing to incorporate such measures. There is a wide growth in ‘transactional sex’ which is not a desirable feature in any society.  How it escalates depends on the country it is carried out in. Countries such as the USA and UK have seen it come about as a result of a gradual cultural development, but we are a small country which is more prone to degradation than the countries which adjusted to it gradually. It could also create a state within a state which makes it more difficult to control; Gujarat and Goa which are now financially independent of central Indian governance are good examples of this.
Adding to this it will adversely affect the economies as well. Leisure dependent economy’s are unstable and Sri Lanka is already a heavily service and leisure dependent economy, so we must focus on basing it more on agricultural industries which are more stable. Introducing more leisure oriented industries will only add to this problem and pose a further threat to the agricultural industries which are already neglected.
Although it may bring in some revenue, it could end up siphoning money out of the country as well, and because of BOI companies and tax concessions we will lose a lot of revenue which could have been used to control the budget deficit.”



Govt. showing two faces to the country

Dr. Harsha De Silva UNP Economic spokesman

"Without the regulator issuing a licence Packer cannot come here. These licences are 100-page documents and can’t be drawn up overnight, some countries take up to a year to draft them. To add to this Packer has given a draft of the licence he wants, this is absurd"


“Sri Lanka has set a new Guinness world record for being the first government to give tax exemptions and the highest concessions to casinos.
It is against the interest of the country to award such exemptions because the economic implications are vast. The Mixed Development Projects ‘iconic’ of John Keells and the ‘Crown Casino’ in James Packer’s Lake Leisure have no taxes. Even on the face of which it is not difficult to realise that there’s something amiss. Why is it that the people are taxed higher and high end enterprises like casinos are not? People are taxed to the absolute core. This is not the way a government  should tax people - there should be more direct taxes and less indirect tax.
I respect John Keells for declining this exemption and maintaining that the tax exemption on hotels is sufficient. This is an act of good corporate social responsibility from a flourishing national industry.
Even in Australia a casino recently opened having agreed to a 29 percent income tax, and the Australian-born James Packer who has failed to obtain exemptions there, has succeeded here. If John Keells has waived the exemption then why exempt only him?
We should not let these regulations pass. It will be discussed under the Strategic Development Act in parliament and must be voted against and defeated.
All countries have laws which strictly regulate casinos and we have such laws too although they are not enforced. Without the regulator issuing a licence Packer cannot come here. These licences are 100-page documents and can’t be drawn up overnight, some countries take up to a year to draft them. To add to this Packer has given a draft of the licence he wants, which is absurd. Even if licences are granted it is under the strict regulatory conditions of the state granting it, not  of the casino owner. No such licensing has taken place and until it does, these casinos are illegal.
As of the January 1, 2012 the Casino Control Act makes all casinos without licences illegal, and makes those violating this liable for imprisonment up to 5 years. Without a licence there is no room to have a casino anywhere in this country. So then why has a gazette notice been passed allowing these concessions in the knowledge that they are unlicensed and unlawful?
The government is showing one face to the religious leaders by maintaining that they are not licencing casinos but are at complete cross purposes here, because without licencing they cannot have the casinos.
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