Israeli Finance Ministry Details Social, Economic Costs of Proposed Casinos

But treasury also points to economic benefits, as Israel begins weighing pros and cons of legalized gambling.

One of Eilat's hotel strips.
Mori Chen

The establishment of casinos in the southern resort town of Eilat would increase by 30,000 the number of Israelis with a gambling problem and cost the economy 185 million shekels ($47.3 million) annually, according to a Finance Ministry document obtained by TheMarker.

The paper, which was prepared by the Finance Ministry in December and included in an internal presentation made by the Tourism Ministry, also found reasons why casinos would be good for Israel, namely by deterring Israelis from gambling overseas or illegally online and enabling the state to tax and control gambling revenues.

The treasury paper also said casinos would boost tourism in Eilat, mainly by luring more Israelis to the city but also by attracting more foreign visitors. The presence of casinos would help compensate for the fact that Eilat is more expensive than comparable resort towns in Jordan and in Egypt.

Israel is embarking on what promises to be a wrenching policy debate about allowing limited legalized gambling in Eilat, after the government decided last week to set up a panel headed by Tourism Minster Yariv Levin to explore the issue. No one has yet spoken about how many casinos would be authorized but the Tourism Ministry said last week it believed two to four would make the most sense economically.

Prime Minister Benjamin Netanyahu has long backed the idea, but religious parties have said they will oppose it, which would complicate an effort to win Knesset approval for the plan.

The Tourism Ministry estimates that casinos could bring in annual revenue of $336 million, based on 2.1 million visitors betting an average of $160 each. They would attract an estimated 284,000 additional foreign tourists to Eilat every year and lead to the creation of 11,000 new jobs, directly and indirectly.

Eilat’s hotels would see a 10% increase in the number of overnight stays, to 230,000 a year, generating 220 million shekels in hotel revenue.

In addition, the Tourism Ministry said, the government would benefit from increased tax revenues as a result.

“This income will be significantly higher than the social costs involved in making casino gambling legal in Israel and in Eilat,” it said.

The Tourism Ministry concedes that casinos will also increase the number of gambling addicts and that it could lead to higher crime rates and encourage money laundering. But according to the ministry, the downside could be managed. “A great deal of knowledge exists for reducing negative side effects,” it said.

It will take from four to eight years after a decision in principle has been made to draw up plans, pass the necessary laws and build the casinos.

But, the Tourism Ministry predicted, after several years of operation revenues from casinos could reach 2 billion shekels, based on 13 countries surveyed, where casino gambling is equal to to 0.13% of gross domestic product.

The Social Affairs Ministry, believes the effects of the casinos would be wholly negative, predicting it would lead to increased crime and consumption of alcohol and illegal drug. To address the problem, it would need 8.5 million shekels a year, it said.yes