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Are South African Casinos Undertaxed?

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Casino fans and gambling addicts are crucial ingredients in making huge ROI and profit margins for the casino industry around the world. Research shows that problem gamblers account for between 30% and 40% of total gambling revenue in the United States and Canada. Slot machines revenue account for up to 60%.

With this in mind, casino operators are taking advantage in a discreet way especially with the absence of rigid regulation and enforcement in the industry. Operators are playing it safe whenever the issue of problem gambling emerges. They are quick to mention the funding of National Responsible Gambling Foundation (NRGF), which receives 0.1% of their gross gaming revenue.

This funding initiative is their passive solution to attend to problem gambling issues. But is this funding enough?

Are These Funds Put into Good Use?

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The National Responsible Gambling Foundation received R23.3 million in 2014. It has earned commendations for its treatment and rehabilitation programme. The only lingering issue is that while its programme is aimed to help problem gamblers, its counselors are limited to only those who are actively seeking for help. Nevertheless, operators have declared significant economic contributions that have helped increase South Africa’s GDP percentage and employment rate.

A National Gambling Board study found that the gambling sector directly added R11-billion to GDP in 2012, with an indirect GDP contribution of R21.9-billion. NGB’s findings also estimated that the local casino industry created over 30,000 jobs. It also has indirectly made over 100,000 jobs with the assumption that every gambling job sustains 4.6 jobs in other industries. A simple example is that land-based casinos are operating online, and would need web development and digital marketing professionals for such operations.

So Are Local Operators Undertaxed?

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It’s surprising that the decent figures mentioned earlier don’t account for gamblers’ losses.  The losses are actually lower considering that a PwC report that says South Africans bled R17.2-billion in casinos in 2014 (an average of R314 for every citizen). Industry pundits think that major casinos’ patrons are actually the low earners that lose an average of nearly R3,000 a month.

The estimates don’t really factor in the spending that could move other sectors if ever the government strictly regulated the local casino industry. Casinos paid 21.4% in taxes, or R3.7-billion, on the R17.2 billion they took from gamblers, plus a portion of the 28% corporate tax paid by the holding company in 2014.

These may really seem a decent set of figures for the casino industry in South Africa; after all it also has increased the GDP and made industry-related jobs. However, Peter Collins, former executive director of the NRGF, says local casinos are undertaxed which is the cause of South Africa’s poverty crisis. “Gambling tax is 39% in Macau. In Berlin it’s 92%. If you tell the Germans they’d get more tax if the rate was lower and more gambling happened, they’ll say that’s exactly what they don’t want.”

Collins’ statements might be factual to a certain extent. But the issue if local casinos are undertaxed is more of a confidential rather than a mere PR embellishment for casino operators. Do we really think these casino operators are revealing actual figures? Expect more studies and debates as South Africa’s gambling industry grows.