Macau wants 40% GGR on casino revenue, but offers Spiffs to reduce the amount

Posted: June 15, 2022, 7:43 a.m.

Last update: June 15, 2022, 7:43 a.m.

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

Macau’s skyline behind Nam Van Lake. The city is nearing completion of its updated gambling laws bill, which includes a higher GGR tax. (Image: Flickr)

Macau’s latest gambling bill sets the GGR tax at 40%, according to an update today. However, the law allows the outgoing chief executive of Macau to authorize a reduction of this tax burden by up to five percentage points.

Macau boss, currently Ho Iat Seng, can approve the cuts for “reasons of public interest”. Specifically, operators who bring in customers from foreign countries will benefit from the tax breaks.

Plan in preparation since May

Chan Chak Mo, a veteran Macau lawmaker and head of a committee reviewing the bill, mentioned the latter discretion during the Legislative Assembly meeting in mid-May, according to GGRAAsia. This followed a closed-door discussion with government officials.

Currently, operators pay a gaming tax of 35%, plus up to 2% more to promote cultural, economic and philanthropic causes. Nor is there more than 3% for urban development and tourism promotion. In total, the effective tax rate is generally 39%.

GGRAAsia spoke to Carlos Lobo, a Macau-based Macau gambling law specialist. 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 pointed out, casino operators will pay a final 40% to the government. Most operators pay 4% of these additional contributions, with the exception of SJM Holdings Ltd. It pays 3% due to its obligations to dredge Macau waters.

The government has yet to clarify the details of how and when this mechanism would be implemented, the lawyer said. Indeed, the regulation that will determine the criteria for reduction or exclusion of the tax on social security contributions is part of a complementary regulation that the government is still in the process of developing.

Concession extensions almost in place

Macau government to sign six-month extension of casino operators’ licenses on June 23, according to local media GDT. This is expected to take place before current licenses expire later this month. The new extensions will expire on December 31.

The extension provides more time to conduct the long-awaited concession re-bidding process in China’s Special Administrative Region (SAR). While most expect the same six operators to keep their licenses, Macau has left the door open for change.

Wynn Macau, Sands China, MGM China, Melco Resorts, SJM Holdings and Galaxy Entertainment have already applied for the extension. Each costs $6 million, due to government delays in introducing updated gambling laws.

Macau’s casinos brought in $36.5 billion in 2019, more than six times the amount in Las Vegas. However, the COVID-19 pandemic and travel restrictions in Asia have had a huge impact on casinos. As a result, in 2020 GGR was virtually non-existent a few times.

China is not thrilled with the SAR’s addiction to gambling. As such, he has yet to indicate how Macau might complete the process of re-licensing.