Australian gambling mogul James Packer's bid to open a casino in Sri Lanka has received approval from the government with reports suggesting generous tax concessions.

Mr Packer, one of Australia's richest men, will invest $US350 million in a 400-room luxury hotel along with a casino, situated at a prime lake front property.

Government spokesman Keheliya Rambukwella says the cabinet has granted partial 10-year tax concessions for two projects.

The exact scope of the concessions have not been revealed by Mr Rambukwella or, in subsequent interviews, by investment promotion minister Lakshman Yapa Abeywardena.

But a copy of a gazette notification from July obtained by the Xinhua news agency shows that in addition to the 10-year concessions, the casino would be charged only 6 per cent tax for another 12 years.

It also details extensive exemptions from customs duty, the construction industry guarantee fund levy, the port and airport development levy, value added tax, pay-as-you-earn tax for foreign employees, withholding tax on foreign loan interest and tax on dividends for 11 years.

In documents viewed by the AFP news agency are details reportedly showing that both companies will continue to enjoy tax discounts much longer than 10 years, paying half of what other businesses will be charged for the next 15 years.

The main opposition United National Party has objected to the new casinos, saying the country will not gain from it because of the reduced tax rates.

Opposition MP Harsha de Silva says the concessions are incongruous as Macau, one of the world's largest gaming nations, charges 40 per cent tax while Singapore, Malaysia and Philippines also had high rates.

Government spokesman Rambukwella does say that the gaming arm of the operation is not covered by the tax reductions.

Casinos to save Sri Lanka

One development will be built by Lake Leisure, a joint venture partner with Mr Packer's Crown group.

A second casino will be constructed by Sri Lankan company John Keells on property owned by the company.

The investment in the John Keells casino is expected to rise to $850 million from the current estimate of $650 million, according to the company.

With the end of the civil war, the Sri Lankan government is hoping high-end casinos will attract the wealthy and boost its tourism sector.

It currently sees about one million tourists a year but aims to push that figure to 2.5 million visitors by 2016.

Even though casinos and horse race betting have operated in Sri Lanka for decades through exploiting legal loopholes, a ban on gambling was only recently lifted in 2010.

The Sri Lankan government refers to the casinos as "mixed developments".

AFP/Reuters