Amidst the controversy over the issuance of liquor licenses by the previous Government, the spotlight is also being focused on the expansion of the country’s gaming and betting industry to attract more foreign investors and enhance the revenue generation mechanism.
However, the proposed expansion of the gaming industry appears to have hit a snag due to the change in administration.
As a result, the establishment of a new authority to oversee the gaming industry as a regulator now seems unlikely, as the new Government has yet to initiate any discussions regarding the establishment of such an authority.
As reliably learnt by The Sunday Morning, no new projects have been submitted to the Ministry of Finance over the past several months, nor has any discussion been initiated regarding the gaming and betting industry over the past several years.
Speaking to The Sunday Morning, Ministry of Finance Department of Fiscal Policy Director Darshana Wijesiriwardana confirmed that there had been no new updates regarding the gaming industry, especially on casino business or the establishment of an authority, after the new Government assumed duties.
“Nothing has happened since the new Government came into power. We are yet to receive any form of advice on the matter,” he said.
When contacted, Board of Investment (BOI) Director General Renuka Weerakoon stated that the BOI had not received any new proposals for casinos in Sri Lanka.
When asked about discussions or proposals regarding the establishment of a new authority to monitor casinos and their revenue, Weerakoon said: “The oversight of tax revenue and other aspects of casinos in Sri Lanka is essentially managed by the Finance Ministry.”
Attempts made to contact Inland Revenue Department (IRD) Commissioner General W.A.S. Chandrasekara, Deputy Minister of Economic Development Prof. Anil Jayantha Fernando, and Cabinet Spokesman Dr. Nalinda Jayatissa were futile.
NAO revelations
Against such a backdrop, as revealed by the National Audit Office (NAO) in its audit report on the IRD, outstanding levies and fines amounting to Rs. 2.98 billion remain recoverable from two casino businesses currently operating in Sri Lanka.
As highlighted in the report, according to Section 2 of the Betting and Gaming Levy Act No.40 of 1988 and the Betting and Gaming Levy (Amendment) Act No.14 of 2015, persons running a casino business are required to pay an annual tax of Rs. 200 million.
However, annual taxes totalling Rs. 440,980,000 from two casino businesses have not been paid. One of these businesses had not engaged in business activities during the related period and action is being taken to recover the Rs. 300 million that remains due from the other business.
According to the Betting and Gaming Levy (Amendment) Act No.7 of 2001, a penalty equivalent to 33% should be imposed on tax paid after the specified date. Nevertheless, the IRD had not taken action to recover penalties totalling Rs. 1,558,295,125 related to the late payment of annual taxes on casino gaming for each year. Recovery of penalties should be conducted in accordance with the Inland Revenue Act No.10 of 2006.
As further revealed in the report, since the Commissioner General of Inland Revenue had only obtained reports of gross receipts for the quarter through department formats relating to betting and gaming, and failed to establish an internal control system to ensure the accuracy of such receipts, the audit had been unable to confirm whether the levy on gross totals relating to casino businesses had been recovered correctly.
Action has now been taken to obtain reports under a new format. A suitable internal control system has been proposed to enable the separate identification of gross receipts and turnover relating to taxpayers.
According to the Betting and Gaming Levy (Amendment) Act No.19 of 2013 and subsequent amendments, reports on gross totals must be furnished by the 20th day of the month following the end of a quarter, and payments must be made within the first week thereafter.
Failure to furnish reports can result in a fine not exceeding Rs. 50,000. When payments are not made on time, a penalty must be imposed in terms of the said act and the Inland Revenue Act No.24 of 2017.
However, the NAO has revealed that for instances where reports on gross totals for the assessment years 2014/2015 to the present were not submitted to the IRD on time, the department had not taken action to recover outstanding fines and interest totalling Rs. 342,281,284 for defaulting on timely tax payments. Gross reports had not been received during the pandemic period of 2019-’21 and no action had been taken to impose penalties.
As revealed in the NAO report, the recovery of the Casino Entrance Levy had also faced challenges.
According to Section 2 of the Betting and Gaming Levy (Amendment) Act No.14 of 2015, every person who carries on a gaming business in Sri Lanka for any year commencing on or after 1 January 2015 is required to collect a levy of $ 100 or its equivalent in any other convertible foreign currency or in Sri Lankan currency from anyone entering the gaming premises.
Although this levy was exempted for the period 2016-’19, it was proposed that an amount of $ 50 be collected from Sri Lankans or residents entering a gaming premises starting in 2019. However, the department had not taken action to recover this levy.
Although those carrying on casino businesses had paid the Casino Levy in installments as imposed by the Finance Act No.10 of 2015, outstanding levies and fines totalling Rs. 2,980,000,000 remain recoverable from two casino businesses.
As information about levies on casino gaming has not been maintained in the IRD’s Revenue Administration Management Information System (RAMIS) software, it cannot be verified that the system’s intended objectives of minimising issues, allowing direct interaction between taxpayers and the tax authority, and ensuring transparency have been achieved.
Present state of the gaming industry
In June, then State Minister of Finance Ranjith Siyambalapitiya stated that a new authority would oversee casino tax collection, counter criminal activity, and mitigate negative societal impacts of gaming. The then Cabinet of Ministers approved the proposal for a gambling regulatory authority, submitted by former President Ranil Wickremesinghe.
The then Government had sought to establish a regulatory body to ensure casino operators paid their fair share of taxes. The former State Minister had highlighted that under the then Government, the State had succeeded in adding 60% of a casino turnover to State revenue.
Previously, only income tax was collected from casinos, but the new measures included a licence fee of Rs. 500 million, an annual renewal fee of Rs. 500 million, and a 15% turnover tax.
Sri Lanka’s casino operators now face a revised fee structure, requiring payments of Rs. 500 million for the first five years and Rs. 1.5 billion for the next 15 years, along with an annual fee of Rs. 500,000. Four owners currently operate under six licences, signalling a shift in the financial landscape for casino businesses.
A new joint venture between Sri Lanka’s Golden Island Hospitality Ltd. and India’s Majestic Group Hotels and Casinos will develop the Majestic Pride Casino at Colombo Lotus Tower.
On 1 August, the Ministry of Finance issued a casino business licence to the companies, which later signed an agreement with the Board of Investment (BOI). The companies aim to position Majestic Pride Casino as a premier tourist attraction, contributing to the economy and creating job opportunities in gaming and hospitality.
In Sri Lanka, gaming is regulated under various laws, including the Gaming Ordinance (1889), Casino Business (Regulation) Act (2010), and Betting and Gaming Levy (1983). Unlawful gaming, such as cockfighting or public gambling, is prohibited under the Gaming Ordinance, with penalties including fines and imprisonment.
The Casino Business Act mandates licences for operations, issued by the responsible minister, and restricts casinos to pre-approved zones. Operating without a licence can result in fines, imprisonment, or both.
The minister has authority over licensing procedures, terms, and conditions, and can introduce regulations to ensure compliance. The Casino Business Licensing Regulations No.1 of 2022 outlines application and renewal processes, licence fees, and operator obligations, such as compliance oversight and record-keeping.
Amendments effective 1 January set licence fees based on investment size, with a minimum investment of $ 250 million requiring a fee of Rs. 10 billion. Existing operators are subject to fees of Rs. 500 million for the first five years and Rs. 1.5 billion for the next 15 years, with renewal fees of Rs. 10 billion.