Regulation and taxation of gambling in Japan

According to the penal code Law number 45 of 1907, gambling in Japan was declared illegal. It constituted all casino and other related games. However, games like horse racing and motorsport were exclusive from this law. In subsequent years, bicycle racing, asphalt racing, powerboat racing and motorcycle racing joined in the list.

The Pachinko, a historical and cultural game, was not recognised as gambling. It is a slot machine game with a pinball. Although money was not directly involved, the small gold tokens given were exchanged with money in nearby shops. The law only prohibited the exchange of money within the Pachinko parlours.

Football pools and other forms of lottery were introduced with time under strict rules. There are three major types of lotteries in Japan; selected number, unique number and scratch cards. A bettor buys a ticket, between 100 to 500 yen, makes a stake, and if lucky, wins prizes of up to 100,000,000 yens.

The lotteries are regulated using the Takarakuji law on lotteries. It states that any lotteries won must be less than half of the total bets staked. The remainder should go to charity. However, in the early 2000s, game lovers and business owners were persuading the government to allow legalisation on casino games. There are significant steps taken to address this issue to date.

Gaming in Numbers

Due to the popularity of Pachinko in Japan, 2011 recorded almost 12,500 Pachinko parlours. Nearly half of Japan’s population spent their extra time in these parlours. The exchequer spends over £160 billion every year on the parlours due to its cultural importance to the people of Japan.

In 1994, the Pachinko market in Japan was worth over £240 billion. 5 years later, these parlours contributed to 5.6% of Japan’s £5 trillion GDP. It employed over 300,000 people. In 2016, the parliament enacted laws to reduce the scope of Pachinko in Japan. These changes welcomed the push to legalise casino games to fill in the void left by these slot machine.

In the meantime, illegal gambling was flourishing underground. From the Yakuza to physical casinos, the industry was booming. Due to the blockade, there are no official revenue estimates. However, the sector rose to billions of pounds every year.

Is Gambling Legal in Japan?

For the longest time, general gaming is still illegal in Japan. Deliberate efforts to legalise the sector started in 2000 when the then Governor of Tokyo proposed an amendment of the Penal Code No. 45 of 1907, and allow gaming in the city. The population was behind it, but it never got to see the light of the day. He also proposed the floating casino – gambling on boats – an idea also rejected by the system.

Lawmakers revisited the legislation in 2015 by proposing the Integrated Resort Enabling Act of 2015. This too, did not gather the momentum needed. By 2018, the bill had to gather national clout which forced the lawmakers to enact it, officially allowing casinos in Japan. However, the cost was high to block out addiction. It cost Japanese residents at least £45 to access the casino. Fast forward to January 2020, the government agreed to form the Casino Administration Committee to oversee casino operations. Its mandate is to license, investigate and administer regulations on casinos and casino gaming.

Taxation Regimes

The absence of a legislative framework on casino gaming meant that taxation on casinos like could not be quantified. However, traces of tax in gaming can be traced back to the Pachinko. Although the government had no direct taxation interest in the slot game, the proceeds from the game went directly to a charity, supervised by the cultural organisation in Japan. The nature of the game did not allow the exchange of money at the parlour.

The first attempt to legalise gaming was on public sports. The overall winning amount constituted between 75 to 80% of total sales. The balance went into the gaming administration and taxes while the supervision and management of the casino went to the local government and government corporations. In the proposed Integrates Resorts Act of 2020, the government will levy a 30% tax on all casino games. Admission to locals will incur a £45 entrance fee. However, the report is still in the Japanese parliament, awaiting confirmation, discussion by the cabinet and approval by the Prime Minister.

Why is Japan Important in Casino Gaming Industry?

Japan’s National Tourism Organisation estimates show that the country welcomes over 25 million tourists every year. It increases between 15 to 20% every year. These statistics ranks it among the top 3 prospective countries in the world. Billions in direct revenue (through taxations) and indirect revenue through gaming-related activities can be realised if the Integrated Resort Act is ascended.

The Chinese anti-gaming laws leave Japan as the next lucrative destination for gaming in the Far East. World estimates on gaming ran into £99 billion in 2017 with a steady rise of about 8% every year. Entry into Japan will significantly boost these numbers. If the Integrated Resort is implemented, it will bring in revenue to the government and offer employment to locals.

Investments into the country will pump revenue into the Japanese economy. American gaming billionaires are ready to invest in the marketplace, employing gaming best practices and injecting new life into the industry.

The law, as proposed, is focused on international arrivals into Japan. The entry fees levied on locals will sieve only locals who have the means to gamble. In estimates, over 55% of total intakes into the casinos will be tourists. This is a win-win situation for the Japanese government. A report by an Osaka research firm in 2017 estimated over 15 million visitors by 2030 into the city. This is over 70% of all admissions in casinos.

Proposed Regulations on Casino Gambling in Japan

The proposed Integrated Resort Law of 2020 mirrored the Las Vegas system. The same method is used in Singapore. In both cases, these Resorts were successful and boosted the country’s tourism sectors, improved employment numbers and improved tax collection. Japan’s model has the following propositions:-

  • Gambling would be allowed in resorts, hotels, entertainment spots and conference facilities. They will be situated in Osaka, Tokyo and Yokohama. Others are Tomakomai, Wakayama and Sasebo.
  • The first 3 pilot casinos established under this law will institute a 30% gaming tax on all games, paid to the local and central governments.
  • The first licenses will be valid for 10 years. Subsequently, they will be renewed after every 5 years. The second batch of casinos will be licensed 7 years after the first batch.
  • At most, the floor spaces allocated to gaming is 3%.
  • Entrance fee into the casino will be £45 for Japanese residents. However, tourists will access the facilities free of charge.
  • Japan is considering using recognised gaming operators to manage the experience. Already, companies such as MGM Resorts International, Las Vegas Sands, Hard Rock International and Caesars Entertainment are ready with their expression of interest. Sega Sammy Holdings and Konami Holdings, 2 of Japanese resort companies with an interest in casino gaming are ready.
  • Japanese locals can only access the facilities 3 times a week or a maximum of 10 times in a calendar month.
About Neel Achary 19393 Articles
Neel Achary is the editor of Business News This Week. He has been covering all the business stories, economy, and corporate stories.