Around 70% of Sri Lanka's gambling now happens online with barely any tax collected, experts warn

Around 60% to 70% of Sri Lanka's betting, gaming and casino activity is now conducted online, with almost no tax being collected on it, tax expert Suresh Perera of KPMG Sri Lanka told Gold FM.

Perera said the scale of the leakage was enormous, precisely because the industry had moved online, and that the state was, in effect, receiving zero revenue from what is now the fastest-growing part of the sector.

"This online casino is a big industry in Sri Lanka," he said. "During the discussions of the Committee on Public Finance, it was pointed out that almost 60 to 70% of the betting and gaming and casinos is happening online in Sri Lanka now, so it has moved online."

He explained that the difficulty in collecting tax lay in the nature of the operators. "An online casino means there is a non-resident running a website outside Sri Lanka. 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."

Perera pointed out that while the betting and gaming levy already covers online activity on paper, foreign operators simply do not pay it. He noted that a further loophole exists in the income tax law, since without a physical presence in the country, these websites also escape the 45% income tax the sector is supposed to attract.

"I am not making a big mistake if I say it is a zero revenue to the country," he said. "According to the data, 60 to 70% of the casino, betting and gaming is happening online. So there is a big chunk of potential tax revenue that we are not getting."

He said the government should look seriously at this area, given the country's fiscal situation. "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."

Dr Sudaraka Ariyarathne, Research Fellow at the Advocata Institute, who authored a 2025 report titled "Getting Gaming Regulation Right: Recommendations for Redrafting the Gambling Regulatory Authority Bill," told Gold FM that beyond the tax leakage, the online platforms were aggressively hooking a very particular group of Sri Lankans.

"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," Dr Ariyarathne said.

He said the platforms sought to draw users in with the promise of a win, only to leave them worse off. "To get them interested in betting on these games, they promise them some sort of win, and then basically betray them on these promises, for these people to loseally didn't have to begin with, because the advertising is specifically targetedtowards a lower social strata of society."

The government's response so far was to move against a number of these platforms.

On the 5th of August 2026, Sri Lanka blocked 24 unlicensed gambling sites, including Stake, bet365, Betway and 1xBet, under the Gambling Regulatory Authority Act No. 17 of 2025.

Ts were later ordered to block a total of 122 platforms.

The Gambling Regulatory Authority Act came into force on the 1st of December 20mentary regulatory framework is yet to be operationalised.

Dr Ariyarathne, however, told Gold FM the blocking of websites alone would not s could simply turn to virtual private networks. "The government's response wasto go and ban a few websites. But banning a website is not going to solve the problem, because people can always use VPNs."

He said a more strategic approach was needed.

"We need to think about how we regulate the financial platforms through which these transactions are facilitated, and a whole lot of other effective strategies to tackle the issues that are part and parcel of online gaion and advertising. And for that, the Gambling Regulatory Authority has a lot of work cut out for itself."

Perera, meanwhile, said Sri Lanka should modernise its tax laws, following the example of India, which taxes online bets far more heavily and captures foreign operators through a "significant economic presence" rule, rather than the physical-presence test Sr