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Interested in Rs 1 lakh-crore tax windfall every year? Legalise gambling

A report some five years ago by the Doha-based non-profit International Centre for Sport Security estimated that the illegal betting market in India was worth $150 billion, or nearly 10 lakh crore at the exchange rate that prevailed then

May 11, 2020 / 06:50 PM IST

Karthik Subbaraman

The novel coronavirus-led lockdown in India has provoked severe withdrawal symptoms among those denied their daily tipple and hapless state governments denied revenue from sale of liquor. Despite loud protestations about morality and public good, most state governments could not wait to profit once again from this vice. Likewise, governments are greedily watching the till as desperate smokers return to puffing to their hearts content and lungs discontent. Millions more are back to chewing gutka while ravenous state governments count the rupees.

According to the Reserve Bank of India (RBI), state excise duty on alcohol accounts for 10-15 percent of tax revenue for most states and is the second or third-biggest source of tax revenue. (Bihar and Gujarat prohibit the sale of liquor). Governments are said to to collect more than Rs 40,000 crore year from the sale of tobacco products.

There is another (arguably) less harmful private vice — gambling and betting (the terms will be used interchangeably here) — for the government to profit from. With India poised for record low economic growth and tax collections, there is no better time than now to legalise, organise and profit from an activity that Indians incontrovertibly love: gambling.

How much revenue is at stake here?

Hard to say because the industry operates mostly underground. A report some five years ago by the Doha-based non-profit International Centre for Sport Security estimated that the illegal betting market in India was worth $150 billion, or nearly 10 lakh crore at the exchange rate that prevailed then. In 2016, India’s GDP was about $2 trillion. In other words, turnover from illegal gambling and betting was estimated at 7.5 percent of GDP.

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In five years, gambling and betting have no doubt grown rapidly, but let us assume that Rs 10 lakh crore is the total turnover. Now, if we were to assume a turnover tax of 10 percent, the potential revenue would be Rs 1 lakh crore, or about the same as Goods & Services Tax (GST) collection in a good month. The assumptions are broad, but not outlandish.

For actual numbers, let us consider estimates from France. The French government expects to earn 586 million euro (1 euro equals nearly Rs 82) from sports betting in 2020, 420 million euro from betting on horse races, 66 million euro from poker, 787 million euro from taxes on casinos and 2.48 billion euro from the national lottery and gaming operator La Française des Jeux (which was privatised in late 2019). Of course, these are pre-coronavirus estimates, but this is what a normal year would look like. The above figures work out to about Rs 35,000 crore.

Law on gambling in India

The gambling/betting scenario in India is quite befuddling. The law makes a distinction between games of skill and games of chance. The former is allowed, but not the latter. But the rule is not applied logically. The authorities have contrived to allow betting on horse-racing and rummy (supposed to be skill), but not cricket or poker (apparently based on chance). Which is why betting on the Indian Premier League (IPL) happens underground. A few thousand crore rupees are thought to be bet on every single match. Now imagine if all this were to happen legally, with bookmakers plying their trade in the open and paying taxes.

Other than trackside betting on horse races, some states also allow lotteries. Kerala, for example, earned Rs 1,273 crore in tax revenue from its state-run lottery in 2019-20. Lotteries are taxed at 28 percent nationwide from March 1. Goa, Sikkim and Daman & Diu permit gambling at casinos. Fantasy games are fine, because they are considered games of skill and not chance. Online gaming is the other big growth area. And yes, gambling is a state subject.

India has forced most bettors and bookmakers to ply their trade in dark corners while a vast underground industry thrives with no regulation and no revenue to the government. Even the Law Commission in 2018 recommended permitting regulated gambling to minimise fraud and money-laundering.

There can be no better time than now, when governments are struggling to raise revenue, to legalise gambling. In addition to the money governments stand to make, it is important to rescue the industry from shady operators. Professionalising betting and gambling is the responsibility of the government. Gambling may be immoral and abhorrent, but that is not why it should be illegal. Yudhishthira, who gambled away his kingdom and his wife in the Mahabharat, won the Kurukshetra war and returned as king of Hastinapura and Indraprastha. Why taint mere mortals?

Besides who can make the case that it is fine for the government to profit from people gambling with their health, but turn churlish with those gambling with their money?
Moneycontrol News
first published: May 11, 2020 05:53 pm

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