Economic Impacts of Gambling

Casino industry revenues make up close to half of the state's tax revenue. Politicians and the public are naturally attracted to an industry that is willing to pay 20 to 30 percent of its gross revenues as taxes. Also, gambling is seen as a source of money that is easier to obtain because it is not a tax on individuals. Gambling has become a very accepted way for governments to raise funds.

The graph indicates the largest estimated state revenues from gambling in 2013 in millions of dollars.

That’s all I have to say about positive economic effects. Now I’d like to move on to social cost, arising from gambling.

Problem and pathological gambling may be an invisible or silent disease but it is not a costless disease. Social costs are the costs borne by society as a whole that result from the behavior of the problem gambler. Social costs includes such items as fraud, theft, bad loans, bad checks, lost work time, unemployment and welfare benefits, insured or publicly supported medical costs, and criminal justice system costs. Those types of social costs are easier to quantify than other types of social costs that result from gambling such as increased rates of suicide, car accidents, and incidence of child abuse.⁴⁵ Another study says that social costs should include lost productivity of spouses, impaired judgment and efficiency on the job, divorces, added administrative costs for unemployed, and the costs of depression and physical illness related to the stress and lower quality of family life.

As you remember, we are concerned about the positive and negative effects of gambling. Now I would like to turn your attention to our country and show how the government regulates gambling. To tell the truth, if you’re running an illegal casino in Russia, you better start packing your bags and head out of town. Otherwise, you can be part of a growing list of illegal joints that the Russian police is cracking down on.

Six years ago, the government decided to close all casinos and gambling bars in Russian cities and relocate them all to special gambling zones. Nowadays, it is possible to try your luck on legal grounds in Kaliningrad and Rostov regions, as well as in the Far East, Krasnodar and Altai territories. Where does the profit from gambling bars go - in the budget or in private hands? Who benefits from the law?

The turnover of the gambling market prior to the adoption of Federal Law 244 was evaluated at one billion dollars per year; tax revenue amounted to $100 million. In this case, according to the Russian law, the tax on gambling business was a local tax. To put it in a nutshell, all payments would be wired to the regional budget, where casinos and gambling bars are located. In the beginning of 2006, in Moscow alone there were 56 casinos and 5,000 gambling bars. There were also 65,000 slot machines in the Russian capital.

It may seem surprising, but no other country in the EU had the number of licenses that Russia had at the time of the adoption of the law. The turnover of the gambling business reached six billion dollars by the time when all casinos and gambling halls were closed. The illegal turnover was three times as much.

The first "legal" casino opened in January 2010. There were almost 500 million rubles spent for the arrangement of special gambling zones, following the example of Monte Carlo and Las Vegas. However, only 97.8 million returned to the treasury in taxes. Investors were in no hurry, and they still do not rush to invest their funds in regional gambling zones.

Eventually, Casinos have been banned throughout the rest of Russia. More than thirty regions - Arkhangelsk, Belgorod, Kurgan, Omsk, Chelyabinsk, Krasnoyarsk, Tatarstan, several regions of the Northern Caucasus - banned gambling institutions on their territories even before the federal law came into force . However, nothing has changed. The turnover of the gambling market in 2008, for example, after the adoption of the law, made six billion dollars (annually). Special gambling areas started to work only in 2010, such as "Yantarnaya" ("Amber"), "Azov-City", "Primorye" and "Siberian Coin."

Is the turnover of income from casinos still illegal? Not at all. The special legal zones have been divided, and it is very unlikely that the state treasury will receive taxes. Who gets the money that people leave in gambling bars?

It was originally believed that the gambling zones would receive the support from private investors. A group of businessmen showed great interest in the "Amber" gambling zone, but the government did not like them much for some reason.

Obviously, with this level of illegal gambling institutions, neither investors, nor the government will be able to obtain any profit in the legal gambling zones. No wonder that investors turn to neighboring countries where it is possible to profit from casinos.

Thus, if there is someone who profits from casinos, it is surely not the federal budget of Russia. After all, the activities of illegal casinos bring much more money than the legal gambling zones that no one needs for several years already. Originally they were created not only as a way to control the gambling activities, but also as a lure for investments in the regions that do not hold the title of "donors" of the federal budget.

But now the government spends billions to struggle against illegal gambling institutions. The government also gets a lot of money for their "protection" by the agencies of the Ministry of Internal Affairs. It is worthy of note that the closure of casinos in major cities has led to a lower level of street and household crimes. And that brings us to the end of the final section.

Summarizing preceding arguments, it is doubtless that economic impact of gambling can be positive. Nevertheless, the social costs exceed the financial welfare in many cases. The answer to the question: can gambling be legalized- is uncertain. Every issue has its own pros and cons. Therefore in each situation the approach should be unique. By that the proper outcome from gambling will be obtained. Yet the negative aspects will arise anyway. This is a double-edged sword, so to speak.

If anyone has any questions, please feel free to ask them and I’ll do my best to answer.

“It's hard to walk away from a winning streak, even harder to leave the table when you're on a losing one.”
― Cara Bertoia, Cruise Quarters - a Novel About Casinos and Cruise Ships

"Lottery: A tax on people who are bad at math."

— Unknown