How can gambling taxation help during COVID in India?
India’s vast betting market remains unregulated and largely untaxed. The Union budget is struggling to cope with the effects of the global pandemic and runs on large deficits. Taxing online casinos and gambling seems an obvious solution.
Whole Sectors of the Economy Stay Out of Taxation Reach
A recently published Sevenjackpots taxation research article raises the question of the numerous offshore casinos operating on the Indian market that do not deduct taxes from players’ online winnings. Even more concerning are the results of a social media survey, citing 71 per cent of respondents as not having paid any taxes during 2020.
ENV Media’s research paper on Indian income tax reminds that all earnings from any form of online or offline betting or gambling above ₹ 10,000 are levied with a flat tax of 30 per cent. Adding on top the Health and Education Cess (4 per cent), the effective taxation rate on all winnings above the non-taxable limit is 31.2 per cent.
According to the same study, reputable online casino operators such as PureWin.com strive for legality and make all necessary efforts to respect Bharat income tax legislation. This includes taxing gaming payouts at the source. Still, there are platforms that advertise “full amount” withdrawals of winnings, placing the responsibility of declaring earnings in the hands of desi gamers.
Legislation concerning the indirect Goods and Services Tax (GST) expressly sets a separate category of casinos, racecourses and other gambling channels, requiring them to charge a rate of 28 per cent on all their entry fees, products and services. Moreover, GST is charged and paid by registered merchants and this makes it difficult to enforce it on offshore casino operators.
Running a Country through a Pandemic is Expensive
Covid-19 is taking its toll on human life and health. Besides the medical aspect, however, the pandemic has a huge impact on the economy. This puts a strain on the nation’s budget on many different levels.
Healthcare spending more than doubles for the financial year 2021-2022, rising by 137 per cent to over $ 30 billion. The sector needs to catch up in terms of health infrastructure, after being underfunded for years. And then there is the vaccination program for 1.3 billion people that has to be paid for.
In an attempt to incite economic growth, Minister of Finance Nirmala Sitharaman's budget is focusing on large-scale infrastructural projects. These include national highways and transport corridors, as well as textile parks, among others. A Development Finance Institution (DFI) is also planned for with initial capital of $ 2.7 billion. An asset reconstruction and management company is also to be set up to acquire bad debt from banks, freeing up their lending capacity. The measures are expected to stimulate spending and bring relief to the overburdened banking system.
Taxing Gambling Will Help Fight the Budget Deficit
The Centre’s budget is planning a $ 23 billion disinvestment reform. Two public banks, an insurer and the national carrier Air India are among the companies set to be privatized. Despite the ambitious disinvestment strategy, the annual deficit is projected at a staggering 6.8 per cent. In light of this, new sources of taxation revenue can make a big difference.
A 2019 KPMG report found that the betting market in India had been growing at a rate of over 7 per cent between 2012 and 2018 (from $ 88 billion to $ 130 billion). Regulating such a vast market will bring a lot of revenue to the Central and State governments. Besides an improved collection of Income tax and GST, proper regulation will force offshore casino operators and illegal bookies to get licensed. License fees can also provide their contribution to the public budget, while operators will have to start paying Corporate Income Tax (CIT) in India. Special gambling taxes can also be a source of a much needed levy income.
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