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Regulation and Taxation of Casinos under State-Monopoly, Private Monopoly and Casino Association Regimes

Author

Listed:
  • Hasret Benar

    () (Department of Economics, Eastern Mediterranean University)

  • Glenn P. Jenkins

    () (Department of Economics, Queen's University)

Abstract

This paper considers alternative forms of regulation and taxation of the casino sector. The model considers the situation of a typical tourist destination country that is using casinos to attract and entertain foreign tourists. The objective is to invest in the sector efficiently while maximizing the amount of government revenue or profits accruing to the country. The regulator must determine how the price of gambling will be set, how many casinos will be allowed to enter the industry and the form and rates of taxation. Four alternative forms of regulation are considered: price regulation, state-owned monopoly, private monopoly and casino association regulation. Turnover taxes on the amount of funds gambled and also annual taxation of the fixed costs of the casinos are evaluated. Applications of the models are carried out for North Cyprus. The conclusion is that the economic efficiency costs and the revenue losses from the absence of effective regulation in these tourist destinations can be very substantial with welfare costs equal to the approximately 75 percent of the tax revenue generated by this sector. Furthermore it shows that while a tax on turnover can be efficient in the case of a competitive industry or a cartel association form of regulation, it will be distortunary if a private monopoly is controlling the sector. In contrast a tax on fixed costs will lead to an efficient result in the case of a competitive or private monopoly cases, but it will lead to allocate inefficiencies if the sector is regulated by a casino association that can only control the number of casino entering the sector.

Suggested Citation

  • Hasret Benar & Glenn P. Jenkins, 2006. "Regulation and Taxation of Casinos under State-Monopoly, Private Monopoly and Casino Association Regimes," Working Papers 1056, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:1056
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    File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1056.pdf
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    References listed on IDEAS

    as
    1. Richard Thalheimer & Mukhtar Ali, 2003. "The demand for casino gaming," Applied Economics, Taylor & Francis Journals, vol. 35(8), pages 907-918.
    2. Paton, David & Siegel, Donald S. & Williams, Leighton Vaughan, 2004. "Taxation and the Demand for Gambling: New Evidence From the United Kingdom," National Tax Journal, National Tax Association, vol. 57(4), pages 847-861, December.
    3. repec:ebl:ecbull:v:8:y:2003:i:10:p:1-8 is not listed on IDEAS
    4. Anderson, John E., 2005. "Casino Taxation in the United States," National Tax Journal, National Tax Association, vol. 58(2), pages 303-324, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Casino regulation; taxation; state-monopoly; welfare cost;

    JEL classification:

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

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