On December 9, Macau gaming operators learned they will have to establish new, exclusive gaming zones for foreign players to help assess the amount of revenue they contribute.
Under Macau’s newly amended gaming law, the government can waive up to 5 percent of taxes on gross gaming revenue (GGR) for operators who successfully attract more foreign visitors. The 5 percent would come from the concessionaires’ public fund and annual social security contributions.
According to GGRAsia, concessionaires must also create special gaming chips to isolate the revenue generated by international passport-holders.
At a press conference on the matter, Adriano Marques Ho, director of Macau’s Gaming Control and Inspection Bureau (DICJ) said the tax break will apply only to those special foreigner-only gaming zones, which have been compared to VIP rooms.
JP Morgan gaming analyst DS Kim isn’t impressed by the plan. In a note following the announcement, he suggested that being limited to exclusive zones will be off-putting to visitors.
“Foreigners probably drove less than 10 percent of mass GGR before Covid,” Kim wrote, adding, “not many of them will likely want to restrict themselves to ‘foreigner-only zones’ (which we assume will only feature a small number of tables) as gamblers typically prefer to move between different tables to find the ‘pattern’ and ‘luck’ they favor.
“Operators are unlikely to make such space too attractive given low expected returns, so we think it’s safer to model the gaming tax rate at (very) close to 40 percent of GGR, with no meaningful discount/waiver.”
News outlets including Macau Business indicate that, though gamblers from Macau, Hong Kong, Taiwan and Mainland China may not enter the special zones, foreigners would be able to play anywhere they liked, and would not be confined to the special zones.
As part of Macau’s recently completed license retender, casino operators agreed to grow the volume of overseas visitors by offering more non-gaming amenities. It’s part of a broader effort to shift from an economy that relies on gaming for most of its tax revenues—a system whose flaws became clearer during the Covid-19 pandemic.
Secretary for Administration and Justice Andre Cheong Weng Chon said Macau has been “over-reliant” on “local and Mainland Chinese patrons,” hence the “waiving scheme” that would mitigate operators’ investment in non-gaming.
But an editorial in Inside Asian Gaming said the numbers don’t add up in the concessionaires’ favor, and the expense of creating new gaming areas and stocking them with special chips could outweigh any tax advantage.
Columnist Andrew W. Scott wrote, “The opportunity to save a minuscule fraction of government taxes and charges isn’t going to get the concessionaires excited about this initiative at all.”
The measure would come into effect on January 1, when the new 10-year gaming concessions also begin.
