Macau’s New Gaming Law Raises Contribution Payments by 1%

Macau casino concessionaires are facing a tax hike among other changes according to the latest version of the Special Administrative Region (SAR)’s new Gaming Law.

Subtle Tax Hike

The Second Standing Committee of the Legislative Assembly has been discussing Macau’s new Gaming Law for over four months but Wednesday saw its last discussion before the bill is voted, at the earliest, on Tuesday, June 23, according to committee chair Chan Chak Mo.

The revised bill amends the wording related to what percentage casino concessionaires will pay in contribution to the public foundation in Macau and the urban construction, tourism and social security fund, removing the wording “up to” before the percentage figure.

Until now, casino licensees paid 1.6% and 2.4% on both contribution payments, from up to 2% and 3%, respectively, and removing the variable component fixes both payments at 2% and 3%, implying a 1% increase in total contributions. Concessionaires also pay a 35% special gaming tax.

Commenting on the tax hike, Credit Suisse outlined the EBITDA change for the industry would equal 4%, and in the light of the ongoing financial pressure on operators, and even if on the assumption that a gradual recovery would take place in 2023, the bank concluded that “the benefit of operating leverage may not be optimal until 2024/25.”

Other Amendments

The new Gaming Law preserves the total amount of casino concessionaires to six and the initial duration of the contract is retained at ten years, allowing for a three-year extension to be granted by Macau’s Chief Executive.

The Chief Executive will determine the total number of gaming tables and slot machines in the SAR, as well as the minimum annual gross revenue per table and slot machine, and in case a concessionaire’s average gross revenue is below the minimum, the concessionaire will be subjected to an additional tax on the difference.

Satellite casinos, as well as junket operators, cannot participate in revenue share schemes, giving satellite schemes a three-year transitional period to conform to the new requirement, while junkets cannot operate on their own within gambling businesses as they can provide only intermediary services and will be entitled to commission payments. Management companies can only charge management fees and their appointment needs the approval of the Chief Executive.

To incentivize visitations from abroad, the Chief Executive may reduce the percentage total of the contributions to the Macau Foundation and the urban construction, tourism and social security fund in case a concessionaire is considered to grow foreign visitation.

According to Credit Suisse, however, “there may be operational difficulties for the casinos to properly segregate the foreign gamers and the Chinese ones,” estimating that historically contribution from foreigners was immaterial at 2-3% of the total industry revenue.