New image for casinos as govt implements gambling tax

tax1.jpg (20495 bytes)by Shamindra Ferdinando
The major casinos have provided over 1000 jobs apart from many indirect job opportunities. It was no secret that operators closed down several casinos several years ago when they decided that they were unable to pay taxes.

The cold-blooded killing of the Havies’ Papua New Guinea rugger coach, Joel Pera, just outside a Colombo casino in the first week of May, 1997 and the alleged presence of one of Anuruddha Ratwatte’s sons at the scene of the crime gave ammunition to print and electronic media to target both casinos and the then government.

For a few weeks, the killing and related developments dominated the local press. Pera, at that time married to a Sri Lankan woman, was shot with a 9mm pistol following a dispute at the casino.

tax2.jpg (19290 bytes)Since then there have been no major cases which involved casinos. However, that does not mean casinos have been free of violence. But it was obvious the situation has improved tremendously over the past few years with top casino operators taking steps to ensure peace in their places of ‘business’ as well as among themselves.

"Big time operators have done their best to ensure an incident-free environment," says an insider, expressing the belief that the government has no option but to help the industry move forward. Expansion would help both the operators and the government, he says, adding that they have to earn enough to pay taxes to the government.

Top casino operators seek a new image as they explore ways and means of taking advantage of increased tourist arrivals subsequent to the government-LTTE cease-fire agreement reached in February. They want to draw gamblers towards their casinos where some of Sri Lanka’s top bands play. They are confident that the government will be helpful in their bid to expand their business in view of the decision to tax them as a legitimate business.

Operators appeared to have come a long way since the brutal killing of Pera, whose wife and the mother of his two lovely children, ended up ultimately with the infamous thug, Baddegane Sanjeeva, considered a regular visitor to some city casinos.

Opposition to casinos is ridiculous in a country where even the President’s Fund draws its main funds from a lottery, another form of gambling while places of religious worship conduct annual auctions (salpilas) to raise money.

Premier Ranil Wickremesinghe’s government has already implemented an ambitious plan to heavily tax casinos and betting shops, introduced by President Chandrika Kumaratunga as Finance Minister of the previous administration in 1996. However, the PA failed to implement the proposal despite twice proposing amendments to the Betting and Gaming Levy Act No 40 of 1988. Unlike the PA, the UNP-led United National Front (UNF) would definitely implement the proposal.

A tax on betting shops was first introduced by Dr. N.M.Perera during the Samagi Peramuna administration.

The gambling ‘industry’ should be developed along with tourism, he says, expressing the view that there must be an effective campaign abroad to attract foreigners, particularly the Chinese. "We have to target them," he says, adding that Sri Lanka must take advantage of China’s recent decision to permit Chinese tour groups to visit Colombo.

Finance Minister K.N. Choksy presenting the government’s first budget in March said that an annual levy of Rs 12 million to be paid up-front in four quarterly instalments at the beginning of each quarter was imposed on April 1 this year. Each casino will be regarded as a separate entity for this purpose.

He also said that an annual Rs 500,000 must be paid up-front on four quarterly instalments at the commencement of each quarter by betting centres. This levy was to be reduced to Rs 10,000 per annum if operators establish that live telecast facilities are not provided. This levy too came into effect on April 1 this year.

Choksy has warned operators who default on such payments that they will be prevented from operating (their business).

The government intends to raise approximately Rs 200 million from these measures.

However, the PA planned to obtain more taxes from the casinos. Their plans were bigger than that of the UNP. The PA first proposed (in 1996) to restrict casinos to five star hotels with a capacity to allocate special floors for gambling. Ironically when this proposal was made there was not a single casino in a five star Colombo hotel. Under the PA’s proposal, the Ceylon Tourism Board (CTB) was to be in charge of the implementation. The PA hoped to raise at least Rs 450 million by levying Rs 5 million each from casinos. Strangely, the PA failed to take into consideration that there were less than two dozen casinos at that time.

In 2001, the PA proposed to raise levies on betting and gambling. The PA hoped to raise Rs 500 million—Rs 50 million more than their previous plan.

Although the levy payable under the Betting and Gambling Levy Act No 40 of 1988 was revised upward, the collection of the levy has been disappointing due to legal and administrative problems.

The source expressed the belief that a lot more has to be done to promote Sri Lankan casinos in the region. The Nepalese government has allowed casinos to operate in the kingdom, the source said, adding that Malaysia too has permitted such activity in their territory.

Bally’-s, MGM, Bellagio, Ritz and Star Dust are Sri Lanka’s major casinos where the best of complimentary food, soft and hard liquor and entertainment are available for their clientele who play baccarat, blackjack and roulette. In some places they can play poker. These casinos are managed by two parties, one of them being the Fonseka family.

"Casinos have existed since the days of Mr. D.S. Sennanayake," Joseph de Fonseka, one of the key operators told me in June 1994 when I met him at his Ritz casino, Galle Face Terrace established in the mid 80s. He introduced me to his youngest son, Lucky, in charge of the operation at the Ritz. Fonseka explained that there was nothing wrong in having casinos where baccarat, blackjack, roulette and poker are played as successive governments have allowed other forms of gambling. He talked freely of his love for casinos, politics and related issues. I kept in touch with him. But tragedy struck the family. Lucky was accidentally shot dead outside Ritz in January the following year. Joseph de Fonseka died several months later.

Licensing of clubs and casinos was done in 1975. A few casinos were in operation when Sim Hong Chye alias Joe Sim was given a resident visa in January 1988 and allowed to set up a major gambling operation in Colombo. Sri Lankan operators were sidelined as Joe Sim, taking advantage of his links with political bosses of the day took control of the entire operation. His casinos, situated in five star hotels attracted many but not only for gambling.

But whatever said and done, he ran a really big operation until the government secretly deported him in the third week of February 1991 and ordered a crackdown on his casinos. Police also crackdedown on small time operators, particularly those who imported jackpot machines and installed them all over the country in a bid to attract small-time gamblers.

Casinos were not allowed to operate. But soon after President Ranasinghe Premadasa was assassinated on May Day 1993, they were back in business. Since then their operations continued to grow and saw a marked expansion during the PA’s seven-year rule.

The change of government last December and the subsequent decision to reach a cease-fire agreement with the LTTE should allow the government to launch a major campaign to promote Sri Lanka as an attractive tourist destination, where those who love to gamble would be able to do so.

The major casinos have provided over 1000 jobs apart from many indirect job opportunities. It was no secret that operators closed down several casinos several years ago when they decided that they were unable to pay taxes.