Black and red

The government should regulate and tax sports betting

The government finds itself between a rock and a hard place on account of rising deficits and the difficulty in raising new revenues due to the slowdown. Between April and October, the fiscal deficit hit Rs 3,07,009 crore, about 75 per cent of the budgeted Rs 4,12,817 crore for the full year. One new source of revenue (perhaps small initially) could be the black economy. This is variously estimated to be between 30 and 40 per cent of official gross domestic product (GDP). Even a modest contribution from the “black” could be useful in getting government finances out of the red. Rather than adopt amnesty schemes, which are one-time measures, it would be better to legitimise and regulate a large chunk of the black economy, thus ensuring recurrent revenues. One option would be to legitimise and tax illegal gambling.

 

Illegal gambling, and betting on sport in particular, contributes a significant chunk of black activity. During Cronjegate, there were estimates that over Rs 10,000 crore was bet illegally on every one-day international cricket tie. That was over a decade ago, and prior to the Indian Premier League. Also it was a relatively unsophisticated era with few spread-betting options. Cricket on its own, therefore, offers a market of at least Rs 5,00,000 crore. Plus, there’s poker, where a punter can buy into a Rs 10,000 table in any metro on any given night. The Goa Tourism Board can attest to the fact that the state experiences a big jump in revenues coinciding with each legal poker tournament at the casinos. In the UK, where sports betting is legal and regulated by the Gambling Commission, the revenue generated was GBP 373 million in 2010 (roughly Rs 2,500 crore), through a tax of 15 per cent on wins, while the companies running gambling operations also paid corporate taxes. Assuming similar tax rates, an Indian tax on gambling could easily raise many thousands of crores of rupees. Also, by legitimising and regulating gambling, the Centre would automatically reduce ancillary crime (namely, corruption of the law enforcement machinery, and match-fixing attempts) since it would give licensed gambling operators an incentive to run clean operations. The new industry would raise revenue for the mobile and internet industry, and IT services companies could set up support systems for back-offices.

Regulating an activity that is already performed and cannot be prevented is not the same as encouraging it. Enlightened governments have always recognised that citizens have a regrettable tendency to seek pleasure in consuming alcohol and other substances, in paying for sexual favours, and in gambling. Instead of spending tax revenues in futile efforts to stamp out such sins, it is better to regulate and tax them. An official attitude of moral repugnance with regard to a popular activity achieves little, if anything. Horse-racing is legal, and racecourse betting is taxed. States run lotteries that yield a large proportion of state revenues (the lottery winners also pay capital gains taxes). Goa hosts onshore and offshore casinos. Where is the moral difference between betting on horses, cards, lucky numbers, and cricket?