Macau Wants 40% GGR on Casino Revenue, but Offers Path to Reduce Cut

Posted on: June 15, 2022, 07:43h. 

Last updated on: June 15, 2022, 09:58h.

Erik Gibbs Read More
Expertise: Asia Pacific Gaming, Gaming Business, Global Gaming.

As Macau updates its gambling laws, a draft version of the bill included a gross gaming revenue (GGR) tax of “up to” 40%. Now, in the latest version, any ambiguity is gone, as the current phrase is “equal to” 40%.

Macau
The Macau skyline behind Nam Van Lake. The city is close to finishing its draft of updated gambling laws, which includes a higher GGR tax. (Image: Flickr)

The latest draft of Macau’s gaming laws sets the tax on GGR at 40%, according to an update from today. However, the law allows the incumbent Macau chief executive to authorize a reduction of this tax burden by up to five percentage points.

Macau’s boss, currently Ho Iat Seng, can sign off on the cuts for “reasons of public interest.” Specifically, operators who bring in customers from foreign countries will receive the tax breaks.

Plan in the Works Since May

Chan Chak Mo, a veteran Macau legislator and the head of a committee examining the draft, mentioned the latter discretionary power during the Legislative Assembly’s mid-May meeting, according to GGRAsia. This followed a closed-door discussion with officials from the government.

Currently, operators pay a 35% gaming tax, plus up to 2% more to promote cultural, economic, and philanthropic causes. There is also no more than 3% for urban development and tourism promotion. In total, the effective tax rate is typically 39%.

GGRAsia spoke with Carlos Lobo, a Macau-based specialist in Macau gaming law. He confirmed the new tax rate, adding that it will apply when new 10-year concessions are in place.

The amended bill includes a 35% gaming tax and a 2% tax to promote cultural, social, and economic causes. There is also a 3% tax for urban development, tourism promotion, and social security.

As a result, Lobo emphasized, casino operators will pay a definitive 40% to the government. Most operators pay 4% in these additional contributions, except for SJM Holdings Ltd. It pays 3% due to its obligations to dredge Macau’s waters.

The government is still to clarify the details of how and when this mechanism would be implemented, said the lawyer. This is because the regulations that will determine the criteria for the reduction or exclusion of the tax on social contributions are part of a complementary regulation the government is still framing.

Concession Extensions Almost in Place

The Macau government will sign a six-month extension of the licenses for casino operators on June 23, according to local media outlet TDM. This is expected to take place ahead of the expiration of current licenses due later this month. The new extensions will expire on December 31.

The extension allows for more time to conduct the highly anticipated concession rebidding procedure in the Chinese special administrative region (SAR). While most anticipate the same six operators to retain their licenses, Macau has left the door open to change.

Wynn Macau, Sands China, MGM China, Melco Resorts, SJM Holdings, and Galaxy Entertainment already filed for the extension. Each comes at a cost of $6 million, the result of the government’s delays in introducing the updated gambling laws.

Macau’s casinos took in $36.5 billion in 2019, more than six times the amount of Las Vegas. However, the COVID-19 pandemic and travel restrictions in Asia impacted the casinos greatly. As a result, in 2020, GGR was virtually nonexistent on a few occasions.

China isn’t thrilled about the SAR’s dependence on gambling. As such, it has yet to indicate how Macau might carry out the license rebidding process.