he world’s largest casino operator - in the process of a us$ 17 billion private equity buyout - said higher taxes would probably discourage investors and reduce the size of the project. But the company still expressed an interest in expanding in Europe and did not exclude the supercasino project.
"When you raise these tax rates, it’s going to limit the amount of capital that’s available to invest in the project," said Jan Jones, Harrah’s senior VP of communications and government relations, in an interview. "When you are investing billions of dollars, it’s about stability," said Jones. "This seemed to come out of nowhere; there was no discussion. That kind of environment makes any investor nervous."
Her comments came two days after UK Finance Minister Gordon Brown introduced surprise plans to tax large casinos at a new rate of 50 percent as part of his annual budget, rather than the usual rate closer to 25 percent.
The tax change would probably hit the country’s first Las Vegas-style ’supercasino’, which is set to start operating in Manchester, England by 2010, provided that Britain’s parliament approves legal changes to permit the project next week.
US casino companies Harrah’s, Las Vegas Sands, MGM Mirage and Kerzner International are all expected to bid on the multi-million dollar project, which Manchester hopes will create 3,000 jobs. British operators Ladbrokes and Rank are also expected to bid.
Sir Howard Bernstein, CEO of Manchester City Council, said it was unclear how Brown’s tax plan would affect the project. "It’s too early to say," said Bernstein in an interview in New York on Thursday. "It’s an unknown quantity." He said the scale of the planned casino and financial arrangements had not been worked out and that there was no real indication of how Britain’s first large casino would perform financially.
Manchester is set to begin the competition to determine the operator of the new casino "as soon as possible" after the project gets the go-ahead and the UK government establishes competition guidelines, Bernstein said.
He added that he still expected to see bids from the major US casino players despite the new tax hike."All the big companies have indicated a willingness to compete," he said. "We’d be very surprised if any don’t."