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The Economics of Casino Taxation

Author

Listed:
  • Hasret Benar

    (Cyprus International University, North Cyprus)

  • Glenn P. Jenkins

    (Department of Economics, Queen's University, Kingston, Canada and Eastern Mediterranean University, North Cyprus)

Abstract

In this article, a model of the costs of a casino is developed that focuses on the implications for economic welfare of different taxation schemes for casinos. The situation being considered is in a country where casinos cater exclusively to foreign tourists. The goal of the country is to determine the maximum amount of taxes that can be extracted from the activities of this sector under different systems of taxation. When the price of gambling is set by regulation above its competitive level, the economic losses created by excessive investment in the sector can be reduced by taxation. A turnover tax on the amount gambled can maximize both tax revenue and the economic welfare of the country. Due to administrative constraints, a number of countries rely on the taxation of the casinos’ fixed assets or a combination of a turnover tax and a tax on fixed costs. The model is applied to the situation in North Cyprus. The annual economic efficiency loss from its poorly designed tax policies on casino gambling is estimated to be about 0.5% of GDP.

Suggested Citation

  • Hasret Benar & Glenn P. Jenkins, 2008. "The Economics of Casino Taxation," Development Discussion Papers 2008-01, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:5520
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    References listed on IDEAS

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    Cited by:

    1. Xinhua Gu & Pui Sun Tam & Chun Kwok Lei & Xiao Chang, 2016. "The Economics of Taxation in Casino Tourism with Cross-border Market Power," Review of Development Economics, Wiley Blackwell, vol. 20(1), pages 113-125, February.
    2. Xinhua Gu & Pui Sun Tam, 2014. "Market structure and casino taxation in tourist resorts," Applied Economics, Taylor & Francis Journals, vol. 46(10), pages 1049-1057, April.
    3. Iza Lejárraga & Peter Walkenhorst, 2013. "Economic policy, tourism trade and productive diversification," International Economics, CEPII research center, issue 135-136, pages 1-12.
    4. Valeria De Bonis & Alessandro Gandolfo, 2013. "The Italian Model of Gambling Taxation: Fiscal Policy Guidelines for the «Sustainable Development» of an Important and Controversial Market," Economia dei Servizi, Società editrice il Mulino, issue 3, pages 239-258.
    5. Gu, Xinhua & Tam, Pui Sun, 2014. "Tax incidence and price discrimination: An application of theories to gambling markets," China Economic Review, Elsevier, vol. 28(C), pages 135-151.
    6. Resmiye Alpar Atun & Hassina Nafa & Özlem Olgaç Türker, 2019. "Envisaging sustainable rural development through ‘context-dependent tourism’: case of northern Cyprus," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 21(4), pages 1715-1744, August.

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    More about this item

    Keywords

    :Taxation; casino; investment; North Cyprus;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue

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