Sri Lanka is currently unable to tax and regulate online casinos because it does not have a dedicated casino regulatory authority, the Committee for Public Finance (COPF) raised last Thursday (6).
The Committee discussed possible interim measures to tax online gambling businesses until a new law is introduced to establish a proper regulatory framework.
“The Inland Revenue Department (IRD) of Sri Lanka does not have the powers to regulate or legalise online casinos. Till the introduction of the new Act, these businesses should be taxed,” advised Committee for Public Finance (COPF) Chairperson Harsha de Silva.
According to de Silva, the IRD had previously denied the existence of online casino businesses operating out of Sri Lanka. However, “once such activities had been traced to persons running the sites, the authority found that Sri Lanka does have online casino businesses.”
Drawing a comparison to physical casinos, de Silva noted, “Licensed, physical casinos, though they have had no regulator presiding over them, have had their taxes collected. Even unauthorised houses are sent electricity bills. If they fail to pay for them, their electricity is cut.”
He questioned IRD officials, “As a basic measure, why have you not taken action to charge them a tax in the meantime, before the new law is introduced?”
Responding to the query, IRD Assessor Thanuja Perera stated: “Within the issuing of the license of physical casinos, the online operations of the business are illegal.”
De Silva suggested that the COPF should also play a role in the formulation of new legislation to create a dedicated casino regulator.
Sri Lanka’s previous administration had proposed establishing a gambling regulatory authority to ensure fair tax collection, counter criminal activity, and mitigate societal impacts. Proposed measures included a 15% turnover tax, a Rs. 500 million licence fee, and an annual renewal fee of Rs. 500 million.
Under a revised fee structure, casino operators now face 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.
Currently, gaming in Sri Lanka is regulated under the Gaming Ordinance (1889), the Casino Business (Regulation) Act (2010), and the Betting and Gaming Levy Act (1983). While unlawful gaming is prohibited, operating without a licence can result in fines or imprisonment.
Despite requirements under the Finance Act No. 10 of 2015 for casino businesses to pay the Casino Levy in instalments, the National Audit Office (NAO) revealed that two casino businesses owe Rs. 2.98 billion in unpaid taxes and penalties, including Rs. 440.98 million in unpaid annual taxes and Rs. 1.56 billion in penalties for late payments.