Macau Junkets Want Help with Collecting Debt

Macau’s junket industry is asking the local government for help in managing its past-due debt problem. That help includes proposed changes in the tax structure, which currently is based on revenue, not profit. Paulo Martins Chan (l.), director of the Macau Gaming and Inspection Bureau, says changes are long overdue.

Macau Junkets Want Help with Collecting Debt

David Group CEO: Too easy for VIPs to skip out on debt

Macau junkets are asking the local government to change its tax laws to help them cope with burdensome debt.

Under current law, junkets are taxed on revenue, not profit, and must pay up whether they collect the debts or not. The operators seem to have a friend in Paulo Martins Chan, director of the Macau Gaming and Inspection Bureau or DICJ, who recently said that amendments to Macau’s gaming law are long overdue, reported Inside Asian Gaming.

That statement prompted a response from Levo Chan, CEO of junket investor the Tak Chun Group, who said changing the law should be at the top of the DICJ’s list. “Taxation reduction is a complicated problem,” Chan said during a panel session at MGS Entertainment Show. “For the VIP market, the cost is high and the profits quite narrow, which makes running our operations quite difficult. So if there is some amendment to taxation it can help the industry further develop. If we can reduce tax it will benefit the local gaming industry.”

He suggested that it’s commonplace for VIPs in Macau to “pull strings in order to obtain large amounts of money. It’s high risk. It makes it hard for us to follow rules and regulations, or else those guests will go to other locations.” Chan added that the government should consider “working with industry to solve the issue of bad debts,” possibly by helping the junkets collect on those debts or “include them in a gaming tax reduction.

“I hope that in this area we can get some support from the government and get some clear laws and direction,” Chan said. “For those people that don’t pay their debts, the government should help the lenders.”

Weena Sae-Kee, vice chairman and executive director of the David Group, agreed. “At the moment there is no mechanism set up by the government to help bad debt,” he said. “I would call for the government to help the VIP business, which is something that originated in Macau.” He noted that it is “very hard to collect bad debts” from Mainland Chinese gamblers.

“We need a very sound mechanism that will protect the VIP gaming industry outside of Macau, such as collecting bad debts in Mainland China through legal channels. Right now we have to resort to all sorts of approaches to collect bad debts. There are some criminals that come to Macau, borrow huge amounts of money and then escape and never come back. We look forward to help from the government.”

Also weighing in on the problem was Macau Junket Association head Kwok Chi Chung, who suggested that Macau’s tax laws include deductions in instances where bad debt is recognized by the court.

The DICJ’s Chan had some praise for the Macau junkets, which he said are “more capable,” better run, and also fewer—down to 109 promoters from more than 200 before the gaming industry’s two-year decline, in which VIPs fled the city’s casinos due to a crackdown on corruption. “We can say that the ones left in the market are rather capable, in terms of financial means, management and operations, which contributes to maintain the healthy development of the Macau gaming industry,” Chan said.

In 2015, the DICJ established stricter regulators for local junkets, including a general audit of the licensed gaming promoters. “In our inspections, we can see that the junkets have been improving their management, including their accounting systems, which meets our development guidelines,” Chan said.

Among the amendments that may be on the table are an increase in “market entry requirement for the junket promotion business”; an increase in “the amount of shareholding held by Macau residents” in such companies; and ways of tackling “unlawful deposits related to a junket promoter or under the name of a junket promoter,” reported GGRAsia.

“We need to make amendments [to the law] to make sure that the industry remains safe and healthy,” said Chan.