American investment bank JPMorgan Chase and Company has reportedly forecast that the over 40 casinos in Macau could boost their earnings by up to 15% a year should the local government decide to decrease the rate of its gross gaming revenues tax.
According to a report from GGRAsia, this estimate comes as the enclave’s Legislative Assembly is rumored to be considering whether to decrease the almost 40% tax local casinos are required to pay by as much as five percentage points. The source detailed that this proposition has been floated as part of an update to a wide-ranging draft gaming bill currently making its way through the legislative process.
Current regime:
Macau is home to some of the world’s largest and most famous gambling venues including the iconic Casino Grand Lisboa from SJM Holdings Limited and Melco Resorts and Entertainment Limited’s $3.2 billion Studio City Macau. All of these operations are reportedly required to pay a 35% gross gaming revenues tax alongside smaller duties for every live dealer table, gaming machine and VIP room they operate that takes their effective rate up to around 39%.
Considerable contribution:
JPMorgan Chase and Company analysts Amanda Cheng, Livy Lyu and DS Kim reportedly used a Saturday filing to explain that a cut to this tax rate of as small as 5% could see Macau’s casino operators post a 12% to 15% boost in their combined earnings before interest, tax, depreciation and amortization for 2023 and 2024. The trio purportedly went on to declare that ‘any reduction in tax would be positive for future profits and cash flows’ with all else being equal after the local industry saw its most recent first-quarter aggregated contribution drop by 4.8% year-on-year to about $1.08 billion as a direct result of the lingering impacts of the coronavirus pandemic.
Reportedly read the JPMorgan Chase and Company analysts’ filing…
“While it’s much too early to comment on the possibility of this happening especially considering likely preconditions for this tax cut, we think ‘it’s always the thought that counts’ when it comes to regulation.”
Permission proceedings:
The six licensed casino operators in Macau are set to see their current concessions expire on June 26 although they have all reportedly accepted invitations from the government to apply for extensions to the end of the year as new rules and licensing conditions continue to be worked out. The source divulged that it is widely thought that the fresh licenses will feature ten-year terms while giving the same sextuple permission to offer gambling in the former Portuguese enclave.
The filing from the JPMorgan Chase and Company trio reportedly read…
“The fact that the government tries to support the industry by further revising the law, which was already considered much less onerous than feared, supports our view that the licence renewal process is unlikely to bring in expected/major disruptions and that the Macau government is accommodative to, if not sympathetic to, the industry. Thus, we think the market’s concern about licence renewal is overdone.”
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