Who will foot the bill for the return of casinos to Czech cities?

The coronavirus crisis is bringing a change in the perspective on gambling revenues in a number of Czech cities. In connection with the impacts of emergency measures and the tax package, councilors are looking for ways to mitigate the drop in revenues. After Chomutov, Kladno is also coming up with a change to the gambling ordinance. The new council has reversed the previous ban on casinos and will replace it with regulation. They believe that the regulatory ordinance is more effective and that ultimately the number of establishments in the city will actually decrease. However, the ordinance only regulates addresses, not the number of gaming machines in the city.

Kladno councilors argue that a complete ban on casinos will drive players into the shadow economy or that consumers will find other opportunities to spend money, for example in the lottery or online betting. Once again, we are encountering a long-standing problem that without sufficient analysis of the local impacts of regulation, the approach of municipalities is not harmonized and does not follow a single key. To establish an effective gambling policy, it is necessary not only to closely monitor data such as the number of establishments and players or the amount spent, but also other macroeconomic and microeconomic factors. The Czech Republic lacks a robust and continuous analysis of phenomena on the gambling market that would provide data for rational and effective regulation.

Gambling – and slot machines in particular – causes a number of accompanying negative phenomena, the solution of which entails high costs. Pathological gambling, addiction, debts, crime. Who will pay the bill? On the one hand, gambling generates high revenues for both the state budget and the budgets of cities and municipalities. On the other hand, the state financially participates in the elimination of social costs, whether through the healthcare system or security forces.

There is also the phenomenon of catchment municipalities and the problematic division of negatives and revenues from gambling. If one municipality allows gambling on its territory, then the municipalities in the catchment area do not receive any income from this business, but their residents are threatened by negative phenomena, including an increase in pathological gambling. Licenses distributed in cities do not take the catchment area into account at all.

“Many municipalities perceive gambling as a stable source of income, which is related to the fact that these revenues are visible immediately, while the social costs are not. It is also because pathological gamblers try to hide these negative phenomena more or less successfully, at least for some time,” points out Aleš Rod, research director of the Center for Economic and Market Analysis, and adds: “The pressure to perceive fiscal revenues from gambling as a potential replacement for funds comes at a very inopportune moment. The gambling business is cited in textbooks as a typical example of the so-called anti-cyclical industry – it does well during recessions. The COVID-19 pandemic is a stressor that can increase the inclination towards addictive behavior in vulnerable individuals, while unemployment will increase the number of potential gamblers.”

If regulation, including taxes, systematically took into account the necessary assistance for those directly affected by gambling – that is, problem gamblers and their loved ones – and provided financial resources to the agency for the prevention and treatment of gambling,

it would make the “invisible costs” visible and help municipalities to transparently assess the impacts of granted gambling licenses.