10 percent to 20 percent
A proposal by the provincial government of Jeju Island to hike its casino gaming tax from 10 percent to 20 percent of gross gaming revenue has been rejected by the government of South Korea.
According to GGRAsia, the local government also proposed three-year license renewal audits and limits on the transferability of casinos licenses; those proposals were also rejected by the central government. Jeju island is a self-governing province, but must defer to Seoul in tax matters.
“This is good news for Genting Singapore Plc as it moves forward with construction of Resorts World Jeju, which should open in late 2017,” Union Gaming analyst Grant Govertsen said. Genting Singapore and Mainland China real estate developer Landing International Development Ltd. are building a US$1.8 billion casino resort on the island, to be named Resorts World Jeju.
The rejection of a gaming tax hike is “also good news for other pipeline projects in Jeju,” Govertsen observed. “Finally, the eight incumbent casinos benefit from this ruling, including Bloomberry’s Jeju Sun casino.”
Projects in the offing include a foreigners-only casino to be developed by Korean firm Lotte Tour Development Co. Ltd. and Chinese state-owned developer Greenland Group, and a casino being planned by Melco International Development Ltd.
Govertsen said the national government “quite possibly rejected the call for higher taxes in Jeju as it does not want to scare off billions of (U.S.) dollars of integrated resort-related capital either already under construction… or moving towards construction” in Jeju and Incheon. Three giant integrated resorts have been announced for Incheon, near the capital city of Seoul. They include the Inspire Integrated Resort scheme, a project of the U.S.-based Mohegan Tribal Gaming Authority and South Korean chemicals manufacturer KCC Corp; Paradise City, a development by South Korea’s foreigner-only casino operator Paradise Co. Ltd. and Japanese pachinko operator Sega Sammy Holdings Inc.; and a project on the drawing board by U.S. casino operator Caesars Entertainment Corp and Hong Kong-listed real estate developer Lippo Ltd.
“In the context of an industry that is already under pressure from a waning Chinese high-end story, keeping the tax component at a competitive 10 percent feels prudent,” Govertsen said, warning that the province could try again to “push through more onerous regulations, including a higher tax.”
South Korea has 17 casinos, but Korean nationals are allowed to gamble at only one, Kangwon Land. While Kangwon Land continues to see “solid growth” in its business, the foreigner-only casinos in South Korea saw aggregate gaming revenue decline by 10 percent in 2015, Fitch Ratings Inc. stated in a March note. The rating agency said at the time that the negative performance was related to dwindling gambling volumes from Chinese players, influenced by Mainland China’s ongoing corruption crackdown and slowing economy.
