Cost/benefit of online gambling

While concerned Filipinos are now engrossed with graft-ridden overpriced government construction projects that have made politicians, DPWH officials, and contractors billionaires, the online gambling problem is also an unresolved issue, waiting for government action. The effects of online gambling are as broad, far reaching, and longer lasting to the government, politics, and society, as the multi-billion peso government contracts scandal.

Last week, online gambling was back in the news with the suspension of access of payment systems to the online gambling sites, and the BSP governor warning that the Philippines might be put back in the Financial Action Task Force blacklist, as online gambling is used as conduits for criminal money-laundering activities. This will cost the Philippines foreign investments funds, outflow of foreign exchange, and encourage financial scams damaging to Philippine economy and finance.

In the government projects scandal, if the kickbacks, SOP, and for the boys are in the 40% of the project amount, it would easily translate to ?500 billion of the government budget every year siphoned off to private pockets. If this has been going on for 10 years, then ?5 trillion or almost the annual budget of the Philippine government was misappropriated. So it’s understandable why some politicians, government officials, and contractors live such ostentatious lifestyles.

Online gambling isn’t a direct assault on government budget or funds, and it generates PAGCOR licensing revenues, adds to government tax collections, and provides some employment opportunities. These have to be weighed against the economic and social costs of online gambling to the country and people, especially the long-term effects on the moral/ethical values of people for a successful democracy.

PAGCOR recently reported that the Gross Gaming Revenues (GGR) of licensed online gambling operators is at ?50 billion monthly, and will be ?600 billion for 2025. This GGR is net of winning payouts and is subject to the franchise and licensing fees of PAGCOR. Together with the withholding taxes on the winnings, PAGCOR’s take will be ?60 billion this year.

Unlike physical casinos in hotels and entertainment complexes, online casinos don’t have big structures and not many employees. The online gambling games are running on servers that may be located in various places, and even in clouds maintained by minimal technicians. Electricity and internet connection fees are more than their manpower costs.

Even adding the corporate taxes and income taxes of the online gambling owners, the government take on online casinos will only be in the ?65 billion a year. This is less than 1% of the ?6.4 trillion government budget for 2025. Even if PAGCOR claims these earnings are used for school buildings and social services expenses of the government, this funding source can be easily replaced by other revenue sources, or even from the savings of DPWH overpriced projects.

Anecdotal stories on the financial/economic problems of losing online gamblers and ruined families are aplenty, that if we aggregate them, the real financial and economic opportunity losses would be 10 times the online gaming revenues of the government, or ?600 billion annually, the same level as the GGR as reported by PAGCOR. And this is money from OFWs, lonely Filipino seamen onboard ships, new middle class Filipinos in BPOs, and even borderline upper and lower class drivers, delivery riders, and office workers.

A classic recent illustration of the bad economic and social equation of online gambling was the e-sabong that was eventually outlawed by the government. The socio-economic costs was so bad and spawned criminal activity that led to corruption of the police and other government officials, and the murder/killing of some operators and bettors, while making a number of politicians very rich.

Online gambling and overpriced graft laden government projects are man-made disasters that the government can solve or at least alleviate. May these operations and practices end soon together with the operators and perpetrators.