Nepal casinos set to reopen, but further change needed, operators say

Published in: Latest Intelligence Nepal’s beleaguered casino industry is likely to be back in business soon, however operators are still concerned about new regulations and are urging the government to do more to attract much needed foreign investment.
The government closed the country’s seven remaining casinos for the first time in their history in April after they failed to comply with new rules that came into effect last July. However, the move had a major impact on an already struggling tourism industry, one of the mainstays of the economy.
According to the new rules, casinos were required to have a paid-up capital of at least 250 million rupees ($2.6 million), with the minimum set at 150 million rupees for slot parlours, known here as mini-casinos.
A new annual license fee, to be paid to the tourism ministry, was set at 20 million rupees for casinos and 10 million rupees for mini-casinos. Similarly, the annual royalty fee, paid to the inland revenue department, was doubled to 40 million rupees for casinos and set at 20 million rupees for mini-casinos and was made payable in advance rather than in arrears.
Despite several extensions of a deadline for the casinos to come under the new regulatory regime, the operators failed to meet the requirements.
After the dramatic shutdown, operators, unions and employees began to put pressure on the tourism ministry to revise the rules. As a result, in July, the new government slashed the annual royalties by 10 million rupees for both casinos and mini casinos and is said to be considering further amendments.
The Tourism Ministry is also mulling over whether to review the paid-up capital requirements, according to Amba Datta Bhatta, the executive director of Casino Association of Nepal (CAN). “The government has realised that the closures have incurred loss to tourism. Hotels are reporting a decrease in occupancy. The government officials are positive about making amendments (to the regulations),” he said.
While the decision to slash some royalties was welcomed by the operators, they viewed other provisions such as a 25 percent tax on casino winnings as detrimental to the business.
“The new rules stipulate that casinos can pay their clients only after levying a windfall tax of 25 percent. This would complicate the matter as the rules don’t specify on how it would be taxed. Neither do we have any systematic tax collection mechanism in Nepal,” Bhatta told AGB.
Kumar Shrestha, the operations manager at Casino Anna said: “I have visited casinos all over the world, but never found the windfall tax imposed upon the players. Nothing is clear about the tax. Will it be collected in an annual basis or every time a player wins a jackpot?” he told AGB. “Casinos attract both regular players and occasional players. It’s not clear how will these two categories of people come under a tax system.”
Shrestha added casino employees had borne the brunt of the shutdown. “Our casino (Casino Anna) owes about 45 million rupees to the employees in gratuity, salary tax, provident funds etc. Some casinos also have yet to pay the rent to the hotels,” he said.
An ad hoc committee representing about 700 employees of Casino Anna met Deepak Chandra Amatya, the new tourism minister on October 17 to voice their concerns, Shrestha said.
“The minister told us that he was studying about the closure. But he assured us that he would keep in mind the workers’ concerns,” he said: “Nepal’s casinos ran for more than four decades without any rules and regulations. But once the government introduced the laws, instead of promoting the industry, it stifled the business.”
When the casinos may reopen is unclear, especially in light of recent developments with Casino Royale.
On September 26, the Supreme Court issued an interim order to allow the reopening of Casino Royale. The Casino Royale’s earlier attempt at the comeback had hit a snag after it failed to deposit the paid-up capital.
However, earlier this week police raided the premises and closed the casino again, creating further confusion over the situation in the Himalayan Kingdom.
Umakant Parajuli, joint secretary of the Ministry of Culture, Tourism and Civil Aviation told local media the Casino Royale had not renewed its license in line with the new Casino Regulation introduced earlier in 2014.
"The Supreme Court did not advise casinos to resume operation without renewing license," Parajuli was quoted as saying. He said this was the reason that led to the request by the home ministry to close the operations.
This year, Nepal’s tourism sector has been dealt one blow after another, with natural disasters striking the Himalayan nation. In April this year, an avalanche struck Mount Everest, killing 16 Nepali high altitude workers. While in early October, blizzards and snowstorms on Annapurna Circuit, a popular trekking trail in central Nepal, killed more than 40 trekkers and local guides.
While the tourism industry was marred by crises, both natural and man-made, Bhim Acharya, the tourism minister was dismissed from his job.
On September 14, the coalition government appointed Deepak Chandra Amatya as the minister for tourism and civil aviation. One of his first actions was to inaugurate a new Department of Tourism, replacing the mountaineering industry division, which also oversaw casinos.
Tulasi Prasad Gautam, the director general of the Department of Tourism, told AGB the government was keen on reviving the casino business.
“We have received green signals from the finance ministry on the amendment of the regulations. We want to ensure that Nepal’s casino operators run the business in a comfortable environment. I am optimistic the business will resume soon,” Gautam said adding that the officials were holding discussions on how to address the operators’ concerns.
“Casino is a part of the whole tourism industry. So, our ministry has taken this issue seriously. We would amend the regulations so that the vital foreign currency and tourists it generates is not lost,” he added.
However, the government could do more to spur investment in the industry, they say.
Bhatta of the CAN cited the example of Sri Lanka where the government has given a 10-year tax holiday to lure foreign investors.
There has so far only been a trickle of foreign investment into Nepal, with Sikkim-based Casino Mahjong, which owes 266.80 million rupees in dues to the government, applying to reopen its casino in Kathmandu. Similarly, Happy World Private Limited, a Kathmandu-based firm, whose foreign investor is Hong Kong-based Silver Heritage Group, has applied to operate Casino Shangri-La.
“Many more foreign investors, particularly Indians [because they consist of the major bulk of clients], would like to invest [in casinos] in Nepal. But the government must to be supportive to the business,” Bhatta said.