Only 9 months after the official opening of the first gambling lounge by Caliente Group, in partnership with Euro Games Technology, the company faces serious problems in their operations, due to the introduction of a local government tax that went into force at the beginning of 2020.
Back in April 2019, Caliente Group General Director Eduardo Hernandez posed in front of the cameras full of excitement and optimism for their new endeavor, backed by his statement that 4 more lounges like the just-opened one were about to open in the near future.
Caliente President Rhon adamant gambling and tourism sectors are intertwined
Fast forward to January 2020 and the company seems to have problems mounting on them, as Caliente Group President Jorge Hank Rhon strongly criticized the local government in Baja California due to the imposed tax on gambling activities as part of its budget law, warning of the possible damage this decision will cause to the tourism sector and to the economy in general.
The former Mayor of Tijuana expressed serious concerns about the tax being imposed without study or consideration of its effects, especially in regards to taxing the winnings of players by 10% that, compared to the border US states where there is no such tax, puts the Mexican gambling industry at a disadvantage and will reflect into and outflow of money to the US due to gambling tourism.
“In the search to raise more, unfortunately they will raise less”, Jorge Hank Rhon, President Caliente Group.
The Mexico City states see this tax as potential for windfall
As per estimates, the generated revenue effect of the tax can reach 11bln Mexican pesos per year due to the 44 out of all 344 casinos in Mexico being located in the State of Baja California and, as this represents a significant source of funding for the state, its Congress seems unimpressed by gambling operators’ claims that they may have to pay up to 900 times more than before the new tax was imposed.
Historically, the state tax collection has a very low rate and it is not clear how imposing extra taxes would tackle that issue itself and improve collection, but state legislators seems to ignore the issue.
Baja California is not the only state in Mexico City to impose this tax, as lured by the revenue estimates, the tax was introduced into the state of Puebla also. What will actually be the effect for the state budgets remains to be seen.