Between 60% and 70% of Sri Lanka’s betting, gaming and casino activity now takes place online, and the state collects virtually no tax on any of it, tax expert Suresh Perera of KPMG Sri Lanka told Gold FM.
“I am not making a big mistake if I say it is a zero revenue to the country,” Perera said. The scale of the leakage is large precisely because the industry has moved online — the fastest-growing part of the sector is also the part outside the tax net.
Why Inland Revenue cannot reach the operators
The obstacle is where the operators sit. “An online casino means there is a non-resident running a website outside Sri Lanka,” Perera said. “Sri Lankans log into this website and place their bets. They don’t have a physical presence in Sri Lanka, so Inland Revenue officers find it difficult to go after these foreign websites.”
The betting and gaming levy already covers online activity on paper, he said, but foreign operators simply do not pay it. A second gap sits in the income tax law: without a physical presence in the country, these sites also escape the 45% income tax the sector is meant to attract.
Perera argued the government should look here before looking at households. This is “a business area that should definitely be looked at for collecting those additional taxes the government will need, rather than trying to look at Sri Lanka’s middle income class, or the low income class, to be the subjects for collecting those additional taxes.”
He said Sri Lanka should modernise its tax law along the lines of India, which taxes online bets far more heavily and captures foreign operators through a “significant economic presence” test rather than the physical-presence test Sri Lanka currently applies.
Who the platforms are targeting
Dr Sudaraka Ariyarathne, a research fellow at the Advocata Institute and author of a 2025 report on redrafting the Gambling Regulatory Authority Bill, told Gold FM the tax loss is only part of the problem.
“There has been a burgeoning of online betting platforms in Sri Lanka, operated seemingly by local operators, that target a very specific demographic of young people in their twenties to thirties, who are fans of sporting events like cricket, but not just limited to cricket,” he said.
The platforms draw users in with the promise of a win and then leave them worse off, he said, with the advertising aimed at lower-income groups. That echoes a complaint raised in Parliament in June, when the Committee on Public Finance chairman Harsha de Silva said online casinos were running advertisements during cricket telecasts with no licensing oversight or tax framework in place. Concerns about children’s exposure to online gaming and betting have been raised separately this month.
Blocking sites has not settled it
The government’s response so far has been to cut off access. On 5 August the regulator named and blocked 24 unlicensed platforms, including bet365, Stake, Betway and 1xBet, under the Gambling Regulatory Authority Act No. 17 of 2025. A day later telecom providers were ordered to block a further 122 sites, taking the total to 146.
Ariyarathne said that will not be enough on its own. “The government’s response was to go and ban a few websites. But banning a website is not going to solve the problem, because people can always use VPNs.” He called instead for regulating the financial platforms through which the transactions are settled, alongside measures on promotion and advertising, and said the Gambling Regulatory Authority “has a lot of work cut out for itself”. Hiru reported that the Act’s supplementary regulatory framework has yet to be operationalised.
Context
The 60–70% figure is not new. It surfaced in the Committee on Public Finance’s own proceedings and was reported by Daily FT on 30 June, which means the estimate has been on the record for two months without a collection mechanism being announced. Perera cited the CoPF discussions directly as the source of the figure.
Hiru did not report a rupee value for the foregone revenue, how many licensed operators currently pay the levy, or whether Inland Revenue has attempted assessments against any offshore operator. No government official was quoted in the report, and neither the Finance Ministry nor the Gambling Regulatory Authority had responded publicly at the time of writing.
