The controversial issue of VIP side-betting has come under the microscope in a new research paper by a law professor at the University of Macau, who says the practice could be allowing casinos to pay less taxes than they should.
Professor Jorge Godinho, writing in the Gaming Law Journal of the University of Nevada, Las Vegas, explained that side-betting, or “multiplying”—in which wagers that differ from those on the table, usually larger, are secretly contracted with third parties, usually junket promoters—constitutes a “parallel betting scheme” that “is not taxed, but goes through official casinos and follows the rules of the games”.
As a result, the casinos could be “unwittingly” using the junkets to foster a “parallel untaxed betting scheme” and thus “a direct erosion of the tax revenue,” the paper says.
It suggests that while side-betting is hard to avoid, “efforts must be taken to mitigate these practices”.
Progress in regulating the local gaming industry “has been slow since 2004,” the paper adds, and is riddled with “gaps and shortcomings.”
An example is the common practice of profit-sharing that allows investors that haven’t been licensed or properly investigated to gain access to the market by buying into the profit streams of VIP rooms.
The source of the problem, Godinho says, is a lack of information on enforcement actions adopted by the Gaming Inspection and Coordination Bureau, the agency charged with regulating the industry.
He says that even though the bureau has “taken appropriate actions,” it has not disclosed its findings or the actions it has taken regarding violations.
“Namely, there is no public data on penalties applied or licenses cancelled,” he wrote. “This information would be helpful to assess the overall compliance of the industry with anti-money laundering regulations and the level of impact (caused by) the enforcement of the suitability requirements.”
The side-betting argument is a difficult one to make from a tax perspective, though, because the government is enjoying a revenue windfall from its largest industry and has already reached the fiscal budget surplus it planned for 2014.
Based on the MOP60.4 billion in surplus revenue amassed through June, which is 95 percent of the total budgeted for the year, the surplus is on a pace to reach an all-time annual record approaching MOP125 billion, 20 percent more than last year’s and twice the amount the government originally forecasted.
A report by the World Bank a month ago showed that in 2013 Macau registered the world’s second-highest fiscal surplus behind Kuwait.
