Casinos returning to the Czech towns: Who will foot the bill?

The ongoing coronavirus crisis is starting to change the perception of the revenues from gambling establishments. In the wake of lockdown measures and the new tax package, city councils are looking for ways to mitigate the fall in fiscal income. Kladno is another example of a municipality that has changed policy towards gambling industry. The new council has reversed the former ban on casinos and will replace it with regulations. The representatives believe that the regulation decree will be more effective, and eventually, the number of establishments in the city will decrease. However, the decree only regulates addresses, not the number of slot machines in Kladno.

Kladno representatives argue that a total ban on casinos diverts players towards the shadow economy or that consumers would find other opportunities to spend money – for example, in a lottery or online betting. Once again, we encounter the long-term problem: Without a sufficient analysis of the local impacts of gambling regulation, the approach of municipalities is not coordinated and synchronized. To establish an effective gambling policy, we need not only monitor data such as the number of establishments and consumers or the amounts of money they spent in local casinos but also other macroeconomic and microeconomic factors. The Czech Republic lacks a robust and continuous analysis of the gambling market, which would provide data for rational and effective regulation.

There is also a phenomenon of catchment areas and the problematic distribution of negative impact and revenues from gambling. If one municipality allows gambling on its territory, towns in the catchment perimeter do not profit from the business, but their population is threatened by negative phenomena, including an increase in problem gambling. The process of granting licenses in the Czech towns does not take into account the aspect of the catchment area.

“Many municipalities perceive gambling as a stable source of income. That’s because this income is visible immediately, while the social costs are not instantly recognizable. It is due to the fact that the gamblers try to hide the negative phenomena, at least for some time,” warns Aleš Rod, research director of the Center for Economic and Market Analysis, and adds: “Pressure to perceive fiscal revenues from gambling as potential substitute income comes at a very unfortunate time. The gambling business is mentioned in textbooks as a typical example of the so-called countercyclical industry – it thrives during a recession. The COVID-19 pandemic is a stress factor that can increase the inclination towards addictive behaviour in vulnerable individuals, while unemployment will increase the number of potential gamblers. “

If the regulation policy, including taxes, took into account the necessary help for those directly affected by gambling – problem gamblers and their families – and brought funding to the gambling prevention and treatment agency, it would make the “invisible costs” of the industry visible and help municipalities to make a transparent assessment of the impact of the gambling licenses they grant.