Like most other industries, the casino business in India too has been in the doldrums in the last couple of years. However, it’s not just the COVID-19 crisis or the economic stagnation that has impacted the sector. It’s actually the huge license fees and government regulations that have hit the industry hardest.
According to the author, economist, and casino entrepreneur Rakesh Wadhwa, by not supporting the casino industry in the country, the government is not only making way for underground operations but also depriving itself of the sizable chunk of income tax that can come from the sector.
“Don’t increase the taxes and regulations to the extent that this industry is destroyed,” he said.
Advocating reasonable and fair taxes and regulations he said, “Government regulations only create entry barriers, what protects the customers is competition. If you limit competition by huge licensing fees or by heavy taxation then the same companies’ monopolize year after year and entry barriers are so huge that new players are kept away from investing in the sector leading to no growth in the industry.”
Minimal controls with predictable policies that don’t change in a long time unless there is good reason to are the best way forward for the casino industry according to Wadhwa.
“People want predictability especially when they invest for a long term. If you want to keep higher taxes then do that at the beginning itself and keep it like that. Create entry barriers in a way that doesn’t hamper competition because that alone is the biggest blessing for both customers and employees. We should look at the money the governments at Macau or Las Vegas are collecting today. They have had a stable tax structure for the longest time and that has led to a billion-dollar industry because predictability inspires huge investments,” Wadhwa said.
Referring to the Goa Government’s rolling out of massive hike in casino licensing fees a couple of years back Wadhwa said, “We saw proliferation and expansion of the industry when the taxes were reasonable and then the government went and increased the taxes by 200 times and that was the end of casino development in Goa. When those kinds of jumps happen, predictability goes out of the window.”
In 2018 the annual recurring fees for offshore casino vessels in Goa with a passenger capacity of up to 200 people shot up from Rs10 crore to Rs 25 crore. In the 201 to 400 passenger category the fee hiked from Rs 11crore to Rs 30 crore and in the above 400 passenger category it shot up from Rs12 crore to Rs 40 crore.
Subsequently, other fees such as license renewal fees, transfer license fees, and non-refundable security deposits were also increased by sizable margins.
Wadhwa questions why the Indian casino scene is not even close to 1/10th of that in places like Macau or Vegas.
“Vegas and Macau didn’t start the way they are now they became like this. And it is the right kind of policies that encourage growth. The industry generates tourism and creates employment and also encourages entrepreneurship. The government should come forward with the right licensing fees structure to help it grow. If that doesn’t happen the industry will continue anyway but it will happen underground where players will evade taxes completely depriving the exchequer huge money that could have been earned through income taxes coming from the sector,” he said.