Macau's final gaming bill draught raises indirect fees and grants 6-month licence renewals
In the most recent draught of Macau's new gaming legislation, which was presented by the second standing committee of the Legislative Assembly (AL) on Wednesday, the effective tax rate on gross gaming receipts will increase from 39 percent to 40 percent. Singapore, the second-largest casino industry in Asia, has a maximum gaming tax rate of 22 percent.
Chan Chak Mo, the president of Macau's second standing committee, stated on Wednesday that the committee was "confident" that the gaming law modification would "get enough votes to pass," with the final version scheduled to be brought to the plenary on June 21 for a vote. He went on to clarify that there were not many last-minute revisions made to the document signed on Wednesday, and that most of the important recommendations remained intact.
The tax base rate of 35% would remain unchanged, while two extra levies to support cultural activities, infrastructure, and other government and Macao Foundation projects would increase from 4% to 5%. The chief executive of Macau will be entitled to waive the fees based on "public interest," without providing specifics.
As reported by NikkeiAsia, according to the revised gaming legislation draught filed by authorities to the commission, gaming operators might have these two additional fees lowered or waived if they can demonstrate that they have recruited gamblers from other countries.
In addition, under the final draught, gaming concessionaires will no longer be required to run purely casino games, and their owners' debt-related responsibilities have been lowered.
Nevertheless, despite these modifications, many wonder the extent to which casino operators will shift to international markets. Former government gaming law expert Antonio Lobo Vilela stated, "The government has not only increased the tax burden on gaming operators to 40% but there is also no guarantee that there would be a tax decrease."
Carlos Lobo, a former legal counsel for Sands China, stated in a LinkedIn post, "Increasing the gaming tax by 1% via 'contributions,' without any previous indication that the Macao government was even considering it, is bad news for investors. I wish (hope?) this was a typo."
The government of Macau will now sign a six-month licence extension for casino operators on June 23, a decision that was anticipated in advance of licence expirations this month. The delay, until December 31, provides additional time for a highly anticipated rebidding process in the Chinese special administrative area, the only place in China where casino gambling is permitted.
Wynn Macau, Sands China, MGM China, SJM Holdings, Galaxy Entertainment, and Melco Resorts all submitted applications for the licence renewal. According to Reuters, they will each be required to pay 47 million patacas ($5.81 million) for the extension. During the 10-year licencing period, casino operators would be required to maintain 5 billion patacas ($618.43 million) in cash at all times.
Due to China's zero-COVID policy, which is also in effect in the former Portuguese territory, gambling in Macau remains much below pre-pandemic levels. Visitors from other nations are prohibited, and visitors from mainland China, Macau's traditional core market, endure burdensome travel restrictions. Wednesday, the government reduced the quarantine period for international newcomers from 14 to 10 days.
The Special Administrative Region of Macau is primarily dependent on casino taxes. As a result of the pandemic, the government has been forced to use its reserves for the first time, and unemployment has reached its highest level in a decade. In the first five months of the year, gaming revenues were 23.79 billion patacas ($2.94 billion), a 44 percent decrease from 2021 levels.
This week, UBS analyst Angus Chan lowered his forecasts for Macau casino revenues and price targets for the city's operators as he pushed back the expected date for normalised Chinese travel rules to the first quarter of 2023 from the previous quarter due to the mainland's ongoing COVID problems.
He now predicts that this year's revenues will reach $8.7 billion as opposed to $12.3 billion, and that operators' earnings before interest, taxes, depreciation, and amortisation will be $294 million as opposed to $1.7 billion. As reported by NikkeiAsia, he stated, "We believe 2023 could be a year of recovery rather than full normalization."
By fLEXI tEAM