Sri Lanka’s casino industry is under scrutiny as authorities grapple with tax evasion, regulatory gaps, and political delays in establishing a gaming regulatory authority. Despite initial approval by the previous government, the current administration has yet to implement key policies to oversee and regulate casinos effectively.
Tax Evasion and Revenue Losses
The lack of regulatory oversight has resulted in significant revenue losses. As of recent estimates, $7.4 million in casino taxes remain unpaid. Additionally, two casino businesses owe Rs. 2.98 billion in levies and fines. Sri Lanka’s Inland Revenue Department (IRD) failed to enforce penalties for late payments, amounting to Rs. 1.56 billion. These lapses have been attributed to inadequate internal controls and the absence of systematic tracking of gross casino receipts.
Proposed Measures to Regulate Casinos
In an attempt to regulate the industry, the government previously introduced measures including a Rs. 500 million licensing fee, a 15% turnover tax, and entrance fees to discourage local participation in casinos. However, enforcement has been inconsistent. For example, a $50 entrance fee introduced in April 2023 has not been fully implemented. The current plan aims to raise this fee to $200 within three years.
The Casino Business (Regulation) Act of 2010 required licenses, but none were issued until recently. Ten new operators have applied for licenses, yet no approvals have been granted. Four casino operators currently manage six casinos in Colombo, including prominent names like Bally’s and Bellagio Entertainment.
Plans for Expansion and Foreign Investment
Amidst regulatory uncertainty, there are plans to expand the casino industry as part of broader tourism and economic development strategies. Singapore’s Kreate Design Pte Ltd announced a $1 billion investment to transform the Colombo Lotus Tower into an entertainment hub, including a casino. Similarly, a joint venture between Golden Island Hospitality Ltd. and India’s Majestic Group is set to develop the Majestic Pride Casino at the Lotus Tower.
Challenges in Establishing a Regulatory Authority
The establishment of a dedicated gaming regulatory authority has been stalled. The previous administration approved the proposal to oversee casino tax collection, counter criminal activities, and mitigate societal harms. However, no progress has been made under the current government. Officials from the Ministry of Finance and the Board of Investment (BOI) confirmed that no new proposals or discussions on this matter have occurred in recent months.
Regulatory Framework and Legal Gaps
Sri Lanka’s gaming industry operates under several laws, including the Gaming Ordinance (1889) and the Casino Business Act (2010). These laws mandate licenses and designate specific zones for casino operations. Amendments to licensing regulations in 2022 introduced steep fees for new investments, requiring Rs. 10 billion for projects with a minimum investment of $250 million.
However, regulatory enforcement has been weak. Reports by the National Audit Office (NAO) revealed systemic issues, including the IRD’s failure to recover fines and the non-submission of required financial reports during the pandemic. The absence of robust internal controls has hindered transparency and accountability in revenue collection.
Outlook
The delay in establishing a gaming regulatory authority and the inconsistent enforcement of existing laws highlight the challenges facing Sri Lanka’s casino industry. While foreign investments offer potential economic benefits, unresolved policy and enforcement issues may undermine revenue generation and regulatory objectives.
