Casinos for youMacau is gearing up for tighter industry control in the final draft of its gambling regulation bill. The amended draft law proposes a 40% GGR tax on gaming, the highest across Asian markets – a final legislative approval vote is expected on June 21st.
On Tuesday, June 14th, Macau released the final draft of its updated gambling bill, consisting of a radical regulatory revamp stipulating the region’s new stringent rules on gaming revenue and junket operations. This long-anticipated document is the product of a detailed evaluation of the proposed amendments to an earlier draft of the gaming bill tabled by Macau’s Second Standing Committee of the Legislative Assembly. The bill is slated for a plenary vote as early as June 21st, as reported in a statement by the Committee’s president, Chan Chak Mo.
Proposed Taxation on Gambling Revenue Set at 40%
The proposed reforms in the bill seek to give gambling regulators more control over gaming operations in Macau, China’s Special Administrative Region (SAR). If passed into law, future casino operators will now be required to pay a 40% annual tax on all gross gaming receipts. This tax rate is significantly higher than all other large gaming markets in Asia. For instance, Singapore, which is the second-largest gambling market in Asia, imposes a 22% tax rate on gaming. It’s also worth pointing out that Macau’s proposed 40% taxation is 1% higher than the 39% that had been presented earlier before the amendment.
The 40% overall tax rate is a combination of the 35% base tax and additional levies amounting to 5%. According to the bill, these levies have been allocated to help finance initiatives geared toward some government and Macao Foundation projects, including cultural, socioeconomic, educational, scientific, tourism, social security, and infrastructural initiatives. Meanwhile, gaming operators who have proof of attracting gamblers outside China will have the extra levies fully or partially waived.
Mr. Chan mentioned that the idea of exempting some operators from paying the levies came about because the Committee acknowledged Macau’s overdependence on mainland China for customers. He added that the SAR’s goal was to be a center for leisure and tourism worldwide, hence the need to focus on expanding the gaming market’s reach to foreign markets. The move to offer tax breaks for non-Chinese bettors is meant to force operators to look for ways to bring in revenue from foreign gamblers – especially after recent restrictions on cross-border and outbound gambling in mainland China.
Pushback Over the Massive 40% Levy on GGR
Initially, the wording was ‘up to 40%,’ but after revisions, it was changed to ‘equal to 40%’. Consequently, gaming experts and industry observers have raised concerns regarding what is now considered one of the highest tax burdens operators have ever had to bear.
Former government gaming law adviser and Macau Gaming Law Book author Antonio Lobo Vilela gave his opinion on the issue, saying:Quote
“The government has not only increased the tax burden on gaming operators to 40% but there is also no guarantee that there would be a tax decrease.”
Meanwhile, Macau-based lawyer Carlos Lobo wrote in a LinkedIn post:Quote
“Increasing the gaming tax by 1% via ‘contributions,’ without any previous indication that the Macao government was even considering it, is bad news for investors. I wish (hope?) this was a typo.”
Despite the controversy surrounding the heavy taxation Macau intends to levy on casinos, the Committee president expressed confidence that the proposed amendments will gather enough votes to pass in the plenary session. The government will also closely monitor casino activities to ensure that each operator meets its minimum annual GGR based on the number of gaming tables and machines in the said establishments.
Casino licenses Extended by Six Months
Licenses issued to Macau’s six operators (Melco Resorts, Galaxy Entertainment, MGM China, Sands China, SJM Holdings, and Wynn Macau) were due to expire on the 26th of this month but have been extended to December 31st. The extension decision was made in February in a bid to allow time for the government to come up with the new laws that would hold sway over the industry for the next decade.
Additionally, 10 years is also the new period for the validity of casino operator licenses, half of the previous concession period, which was 20 years. Moreover, the administration can extend the 10-year tenure for a further three years for some operators under special circumstances. And to acquire the license extension, operators must part with 47 million Patacas (~$6 million). The extension also allows time for a more thorough rebidding process by operators who wish to continue providing services to the market.
The bill further stipulates that Macau’s six casino operators must always have 5 billion Patacas (~$610 million) in cash during the 10-yer license period. It’s worth noting, however, that as we speak, all the casino operators in Macau, except for SJM Holdings, meet the liquidity standard.
As is the case with most parts of the final draft of the gaming bill, nothing much has changed concerning junkets, who will only be allowed to provide services to one operator each.
China and its SAR Continue Cracking the Whip on Offenders
The Macau gaming industry is still striving to recover from the recession that followed the Covid 19 pandemic. The Chinese National Immigration Administration (NIA) is in the process of enforcing strict measures to keep bettors within the mainland ‘to the maximum extent possible.’ The NIA met in May to discuss problems related to gambling, concluding that a crackdown on cross-border gambling would be the immediate solution.
So far, about 290 groups and 90,000 individuals supposedly involved in gambling-related crimes have been denied exit from the mainland. This poses a challenge for operators in the Las Vegas of Asia, who will now have to get more creative to bring in revenue from other jurisdictions. Another setback is Covid-related restrictions, including a 10-day hold for foreigners entering Macau. The SAR industry has suffered greatly, and despite some notable recovery, it has yet to reach pre-pandemic revenue numbers, which bested the Las Vegas Strip by over 600% in 2019.
You might also like