Macau Clarifies More of What’s In Store for Casino Operators

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Macau continues to clear the air on what’s in store for casino operators over the next several months. Officials have released more details about what is likely in store with the city’s updated gambling laws, and the details have operators and analysts a little less tense over the future.

Macau Concessions to Remain at Six

Friday’s announcement by the Macau authorities outlined the main elements of a bill that proposes a new gaming regulatory system. This will change the way the industry sees itself for the next few years.

The government-backed bill would allow for a maximum of six concessions, according to Macau’s Executive Council. It would also end the sub-concessional model.

The concession period was limited to 10 years, less than the 20 expected and requested. However, it can be extended for an additional three years in exceptional circumstances. The current concessions had a lifespan of 20 years.

Through some legal improvisation, three of the six current operators, Sands China Ltd., MGM China Holdings Ltd., and Melco Resorts and Entertainment Ltd., were allowed to enter the market. Their gaming rights are actually held by sub-concessions that were created from three concessionaires who were selected through a 2002 public tender. These original concessions were formed locally by Wynn Macau Ltd, SJM Holdings Ltd and Galaxy Entertainment Group Ltd.

Concession Delays Still Not off the Table

The newly-announced bill will be sent to the Legislative Assembly, where it will be voted upon by its members. It will depend on how long it takes for the procedure to complete. The city’s legislators can also make changes to the bill.

Andre Cheong Weng Chon, a spokesperson for the Executive Council, acknowledged that the Legislative Assembly might take some time to review the bill during Friday’s press conference. To give lawmakers enough time to review the bill, he said that the Macau government might consider prolonging the concessions.

Macau Operators To Pay More Taxes, but Avoid More Scrutiny

It was doubtful, at first, that the 35% special gaming tax would be changed. The subject didn’t come up when Macau’s government was reviewing the new gambling laws, but it has appeared now.  

The effective rate is now almost 40%. Additional government tariffs are possible, but not likely. The Macau gaming tax rate is something that concessionaires are used to. However, they have to keep an eye on the final gambling laws, as Macau’s dependency on tax revenue, coupled with the COVID-19 pandemic, could still force changes.

The unexpected abandonment of the proposal that each concessionaire should have a representative or delegate from the government was a huge win for concessionaires. Many analysts and insiders pointed out how this idea could backfire on the government and possibly burden the SAR with unanticipated consequences like corporate liability issues. The government does have many options to control concessionaires, and it doesn’t need a representative at each venue.

Analysts Like What They See

The general verdict is that the new framework is beneficial to operators. JP Morgan analysts support this idea, as well. Analysts DS Kim, Amanda Cheng and Livy Liu stated over the weekend that a number of investors’ concerns had been “greatly alleviated if not removed” with the release of the updated details. “Some of investors’ biggest fears should now be alleviated,” they added.

A review of the updated gambling laws will likely commence this week and take about two months.

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