f the 13 % gaming tax proposal is passed by parliament, it would significantly undercut the near 40 % effective tax on gross gambling stakes levied in Macau, and would be – in theory at least – strongly competitive with the 15 % and 27 % charged respectively on VIP gambling and mass-market play in the Philippines.
Singapore – which has two casino resorts – has an effective tax rate of 12 % on the VIP gross (5% gaming tax plus 7% Goods and Services Tax) and 22 % on the mass (15 % gaming tax plus 7% GST).
Some gaming industry sources think gaming tax rates can influence where VIP gamblers play. The lower the gaming tax, the more money the house has available to share with player agents and high roller players runs the argument. That can include rebates on player losses or perks such as hotel suites.
Most industry analysts spoken to by Business Daily dismiss the notion that gaming tax rates confer significant competitive advantages or disadvantages relative to other casino jurisdictions. They point out that the ability of players or player agents to move money into a jurisdiction, the ease with which players can secure credit, and the convenience of access are generally better predictors of player attendance than tax rates – even in the high roller segment.
But former Las Vegas Sands executive vice president Bradley Stone, now president of Global Gaming Asset Management, a firm that has an equity investment in and management contract for the new us$ 1.2 billion Solaire Resort & Casino at Manila Bay in the Philippines, told Business Daily that gaming tax rates “absolutely do make a difference” when it comes to offering gaming jurisdictions a competitive edge.
“We do have the advantage of a lower [gaming] tax rate,” he said, referring to the Philippines. “We’ll use that in terms of our [junket] commissions but it’s not necessarily [in order] to go right at Macau. It’s to encourage people and give them more reasons to come to the Philippines once in a while and try out our resort,” stated Stone. His company has proposed building a casino resort on Taiwan’s Matsu chain of islands off the mainland Chinese coast of Fujian.
The 13 % gaming tax for Taiwan’s possible casinos was reportedly agreed during a meeting that included representatives from the Ministry of Finance, and the Ministry of Transportation and Communications. Last July the latter was put in charge of coordinating government agencies over implementation of the casinos plan.
Industry sources have told Business Daily that other commercial terms have also now been spelled out to would-be investors in the global gaming industry but have so far not been released to the media. An important point for would-be investors in Taiwan that has not been resolved – at least in public – is whether any Taiwan casinos will be subject to corporate tax on profits.
In Macau, corporate tax is normally levied at 12 percent on company profits above us$ 36,782 according to a report in January from KPMG International. But that tax has so far been waived for Macau’s casino operators.
In Singapore, corporate tax does apply to the two casino operators. The corporate tax rate in 2013 is 17 percent according to KPMG. In Nevada there’s a maximum gaming tax of 6.75 % but there’s no state corporate tax. Las Vegas casinos do however pay federal corporate tax. According to KPMG the headline rate for US federal corporate tax is 40 %.
A note from Al Chang, partner, international tax services at financial services firm Deloitte’s Taipei office, says any firm based outside Taiwan is subject to profits tax “only on its Taiwan-sourced income, but at the same rate as applies to domestic companies”. In Taiwan the headline corporate rate is 17 %.
Direct tax from gambling at 35 percent of the gross is the main source of the Macau government’s income, bringing in 83 % of the us$1 6.2 billion) in public revenue recorded in the provisional figures for last year.
Macau also has a levy of up to 2% of the gross paid to Macao Foundation and then redistributed to local charities and associations. A further levy of up to 3% of the gambling gross goes on city development, tourism promotion, and social security.
In Taiwan’s case the proposal is to split the 13 % tax on the gross four ways. Five percentage points would go to the central government and seven percentage points to the local government. A fund fighting gambling addiction would receive 0.5 of a percentage point, with the remaining 0.5 percentage point used to finance various public welfare operations.
Taiwan’s proposed 13 % tax on the gross might not be the only tax liability for players. The Ministry of Finance has proposed a 20 % tax on winnings above a certain threshold.