Change could come in 2019
The Chinese government is considering a tax increase for Macau casino operators.
According to the Las Vegas Review-Journal and several Chinese media outlets, the tax hike could be implemented ahead of license renewals for the gaming companies.
In a recent interview, Macau’s Secretary for Economy and Finance Lionel Leong Vai Tac said the government is looking at a potential change in gaming tax rates after conducting a “mid-term review” of the industry.
The review “will mainly look at whether the gaming operators have fulfilled the promises they made when they got their concessions,” Leong told the Macau Post. “The results of the mid-term review will be the foundation of whether we will renew their gaming concessions (under new terms) or continue the way it is now.”
While Leong downplayed suggestions of a potential tax increase, CLSA Ltd. analyst Aaron Fischer told GGRAsia Macau might hike the tax from an effective rate of 39 percent to 43 percent. Of the current 39 percent on casino gross gaming revenue, 35 percent goes to the government.
Macau has six gaming license holders including three from Nevada: the Las Vegas Sands Corp., Wynn Resorts Ltd., and MGM Resorts International. Operators with 20-year concessions will see their licenses expire starting in 2020.
“The uncertainty on concession will add further risks to Macau investors in addition to recent gaming revenue slowdown and crackdown on the junket system,” said Janie Zhou of Macquarie Securities in a research note. “Although highly uncertain at this point, a potential outcome on concession renewal could range from no change to an increase in gaming tax or even re-tendering of the current six-concessionaire structure.”
Macau’s casino industry has been on a downslide since June 2014. After the Chinese government cracked down on corruption and money laundering, high rollers fled the gaming destination for fairer climes. That resulted in seven straight months of revenue declines. In December, Macau saw a 30.4 percent drop in revenues, the market’s largest-ever single month drop. Overall in 2014, Macau’s casinos saw gaming revenue fall 2.6 percent, the industry’s first-ever annual decline. Even so, Macau produced $44.1 billion in gaming revenue last year, more than seven times the amount of annual gaming revenue produced by casinos on the Las Vegas Strip.
Zhou told investors a decision on new licenses is likely to be in place before Macau Chief Executive Fernando Chui leaves office in December 2019.
