Smart Business or a Problematic Issue?

Games based on probability and chance, have attracted people since ancient times. Greece, Egypt and China are those countries where during gatherings it was common to organize games based on dice and probabilities. Gambling games have existed since the very beginning of the existence of human society, because taking a risk is the human’s nature. People make different decisions on various daily and practical issues, taking risks, expecting certain desired result. From the beginning, such games have had the goal of communicating, interacting and entertaining. However, in modern society gambling games are considered to be a big business in the sphere of entertainment (casinos, gambling games, bingos, online betting platforms, etc.) that can have a significant impact on economic and social life. To evaluate the impact of this highly specific field, it is important to consider its benefits and damages. This will help evelop and implement a tax-regulatory policy that will reduce the negative effects and get more benefits. Usually, enterprises involved in this business exaggerate the benefits of casinos and gambling games, in order to shrink those long-term costs and effects that casino or gambling business may have on the community and the entire economy. Shall casino business be legalized? Are state budget revenues equivalent to those damages that may arise in a long period of time as a result of the spread of casino and gambling business[i]?

Supporters of casino business point out the jobs created by casinos and the decrease of unemployment in the community to be the most important positive factor in different countries. To make clear, whether this business has led to a lower unemployment rate, it is necessary to compare the change in the unemployment rate in the casino deployment community with the change in the unemployment rate at the entire economic level, in order to understand whether other economic shifts have not resulted in the decrease of unemployment. On the other hand, very often the workforce living in a casino deployment community may not have the appropriate qualifications and skills to undertake the job. This leads to the fact that the majority of workers come from other communities and the local unemployment decreases not by employing  the capable people in the community, but by artificially increasing the local population. Of course, the availability of casinos and gambling games in any community may reduce unemployment, as the availability of a casino in the community may contribute to the creation of jobs in other areas with a multiplicative effect. At the same time, the community adaptation (creating more attractive conditions for potential customers), infrastructure improvements may make the community more attractive  for the tourists who prefer this type of entertainment. This, in its turn, will bring new cash flows to the community. Thus, the locals’ incomes may increase, leading to the increase of consumption, promoting the economic activity. However, this chain works with the above mentioned logic, if we consider that the main customers are non-residents who bring new cash flows to the community. The waste of income in casinos by the community’s population, may have a completely reverse, negative multiplicative effect, leading to the aggravation of the situation in other areas at the expense of reducing consumption.

As positive feature of casino and gambling business, the major tax revenues are mentioned: the state and community budgets are somehow dependent on the revenues that can reach their highest peak with the increase in the number of casinos and gambling games. If we look at the example of Armenia according to the data provided by the Ministry of Finance, the payments made by lottery, gambling games, internet gambling games and casinos in 2016 and 2017 have made only 0.46% and 0,74% of the total budget revenues of 2016 and 2017 respectively[ii].

2016 2017
State budget revenues                    1,171,107,264,798                 1,210,012,342,000
Taxes and fees                          5,430,170,000                       8,950,760,779
% 0.46% 0.74%

For comparison, in the US (the latter is one of the countries with a developed casino business) the correlation between the tax-fee, charged from the field, and the state budget revenue is about 2%. However, it is senseless to draw comparisons between Armenia and the US, or Armenia and any other developed country. In the United States, this business is a major employer and taxpayer. In separate states (such as Nevada, Illinois), taxes and fees paid by the representatives of this business make up 40% of state budget revenues. Besides, in developed countries, including the United States, there are credible analyzes and statistical information on business income and external negative effects. In case of Armenia, no matter how much taxes and fees are charged, it’s not appropriate to say that this business does not lead to profound social problems. For transitional countries and for the ones with a lot of  social problems such as Armenia, the propaganda, advertising and spread of casinos and gambling, are full of social problems. And the worst thing is that there are no credible analyzes on the bankruptcy, crime,  spread of prostitution, and on the appearance of other social ills. In recent years, we have been facing with gambling, online and offline bet points and casinos ads on TV, as well as on the online platforms and streets, in the form of advertising boards. If in case of casinos, the control provided by law is easier  in terms of age limitations of the users of the service, then it is difficult to carry out such control over the online platforms providing opportunities for online betting. Some websites do not have a special control mechanism, and even in case of its availability, it’s quite easy for a teenager to submit fake data. Nevertheless, it should be noted that major progress is recorded on the regulation of the field. In the past, the Law on Gambling and Casinos did not regulate the field of online gambling. Now we have a revised law, which includes the regulation of internet gambling too. Recently, the National Assembly has already made a decision to make additions to the law on gambling, internet gambling and casinos. The project is aimed at strengthening the “rules of the game” for the representatives of this business. Particularly, various mechanisms are planned, such as restrictions on gambling for gamblers  and for chronic addicts, as well as toughening administrative fines and penalties against violations. Specifically, according to this new decision, it is mandatory for the gambling organizer to make sure that the player is over 21 years old, through any personal identification document. On the other hand, if the player puts his family in financial and material hardships, his/her relatives have the right to apply to the court to recognize the gambler as person with limited capacity. Within six days after the decision is made by the court, the decision is sent to the organizers of gambling. After receiving the document, the organizer should exclude any transaction made by a person recognized as with limited capacity. Meanwhile, any transaction that has been made after being recognized as such is deemed to be canceled upon the request of the party concerned. In this case the organizer is fined 0.5 million AMD.

The prohibition of involving teenagers in gambling and using special means against the gamblers, which is planned by this decision, can be regarded as a positive step aimed at reducing social issues related to the field. However, it should be noticed, that information related to this field has been and remains closed. It is difficult to find information on the impact of gambling in Armenia. The Ministry of Finance of the Republic of Armenia should provide a credible analysis that answers the following question: Are budget revenues supposed to be carried out from a social perspective through problematic business such as casino, gambling business? From this perspective, positive and negative effects of this business should be considered. One may conclude, that to the budget cash flows, job creation by the business and other benefits should be placed on one scale and the social problems of the business and the long-term costs that may arise, on the other scale.

As a result of research conducted by the National Institute of Health in the United States, it was revealed that the widespread use of gambling can lead to a number of problems[iii]

Social problems: The social consequences of gambling are considered to be large-scale financial losses, the increase of crime, the decrease of productive working hours for gamblers, bankruptcy, and, of course, emotional stress in families. There are no analyzes in Armenia about how much the average citizen loses or benefits, and how the gambling addictive and ill-treated manifestations affect the adolescent or teenage members of the family.

Psychological problems: The continuous operation of the win-lose-take a risk chain can have a significant impact on mental health. Dependence on gambling may result in depression, general anxiety, and, at worst, cause drug addiction and psychological disturbance. The sharp drop in mood, depression, impulsive decision-making, and constantly repeating depressive phenomena are considered to be the frequent symptoms that occur among people who are addicted to gambling. In this context, it would be desirable to have official statistics provided by the Ministry of Health in Armenia about people with similar symptoms.

Biological problems: A group of US researchers from the National Institute of Health attempt to prove that gambling can also have biological effects. These researchers are trying to demonstrate the effects of neurological processes on brain and body caused by gambling. Further studies will help to determine what kind of influence the continuing depressive situation and dependence may have on the human organism.

In sum, it can be stated that online and offline casinos and gambling games can cause a number of social and economic problems. Sometimes local and central state bodies can ignore many issues, to ensure the taxes and fees charged from this business. Although this may provide cash flows to the budget in a short period of time, however, in a long period of time, social and economic problems can arise, which solution may require bigger costs. From this perspective, it is very important to provide transparent and credible information about the field to the public and interested structures and parties. On the other hand, the Ministry of Finance of the Republic of Armenia should apply such restrictive and regulatory mechanisms that will reduce the above-mentioned social consequences and will prevent the receipt of super-profits from businesses and their investment in the projects that promote to the spread and empowerment of the field.

 


  1. “Legalized gambling for economic development”, Robert Goodman, March 1994, Northampton, United States (225 pages), citeseerx.ist.psu.edu
  2. nih.gov
  3. minfin.am


[i] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.836.6310&rep=rep1&type=pdf

Legalized gambling for economic development. Robert Goodman

[ii] http://www.minfin.am/hy/page/petakan_byujei_hashvetvutyun/

[iii] https://www.nih.gov/


Author: Lusine Khachatryan. © All rights are reserved.

Translator: Armine Poghosyan, English.


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