Macau mulls casino tax cut as gaming revenue plummets
MACAU is considering revising a casino bill, including a potential cut on some of the world’s heftiest gaming taxes, as the gambling hub faces plunging revenue amid China’s Covid lockdowns.
Share prices of the city’s licensed casino operators soared in the US on Friday (May 13) after Macau media first reported the proposed revisions. Las Vegas Sands and Melco Resorts & Entertainment each rose 15 per cent, while Wynn Resorts jumped 13 per cent.
The Chinese enclave is willing to consider a tax cut of as much as 5 per cent on casinos’ gaming revenue, if they are able to bring in players from outside of China, local media including GGR Asia reported. The reports cited Chan Chak Mo, president of a committee of the Macau legislature that is currently scrutinising a draft bill to amend the city’s gaming law.
The city currently taxes casino operators about 40 per cent of gaming revenue. The government believed the city had been relying on mainland China too much as a source of gambling customers, Chan said following a closed-door meeting with government officials, according to the reports.
Other relaxations include allowing so-called “satellite casinos” to continue their operations. These casinos are gambling spaces in properties owned and managed by third parties who piggyback on gaming operators’ licences. The government originally proposed to ban operators from running gambling areas in properties not owned by them, meaning they will need to either buy the venues from their third-party partners or stop collaborating with them.
Macau’s legislature is expected to pass the gaming bill by the end of June, paving the way for officials to launch tendering for new casino licences as the current ones are due to expire next month. The government has allowed current operators to extend their licences to the end of the year, providing more time for the process.
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An easing of the bill signals Macau officials’ continuing support of the gaming industry, which accounts for about 80 per cent of government income. The sector has been battered by Covid-induced travel restrictions from mainland China - its largest source of customers - as well as Beijing’s crackdown on high-rolling gamblers and junket operators that provided services and credits to them.
Chinese leaders, concerned about capital flight and the enclave’s role in facilitating it through gambling, have been pushing it to diversify into other industries such as Chinese medicine, events and tourism and financial services.
“The fact that the government tries to support the industry by further revising the law supports our view that the licence renewal process is unlikely to bring in major disruptions and that the Macau government is accommodative to, if not sympathetic to, the industry,” said JPMorgan Chase analysts including DS Kim in a note on May 14.
A maximum tax cut of 5 per cent would be equivalent to a boost of 12 per cent to 15 per cent to the estimated industry earnings before interest, taxes, depreciation and amortisation for the coming 2 years, Kim said.
Still, tougher regulations remain in the proposed bill, including the requirement for operators to reach a minimum revenue amount or face extra payment to the government, as well as banning junkets from operating rooms within casinos or sharing revenue with them. BLOOMBERG
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