Should gaming taxes be raised, casino operators may look for an alternative to offset the increas e in taxes.
PETALING JAYA: A tax hike may be in the offing for the gaming sector in the upcoming Budget 2014, especially as the Government is hoping to reduce the country’s budget deficit, according to RHB Research.
“We believe there is a possibility of an upward revision in gaming taxes when Budget 2014 is unveiled on Oct 25 as the Government explores ways to beef up its coffers,” said RHB Research in a note.
In 2012, Malaysia’s budget deficit stood at 4.5% of GDP. The Government is hoping to reduce it to 4% this year.
The research house estimated that the gaming sector contributed about RM2.3bil to RM2.7bil to the Government’s tax revenue in 2012.
The last time the Government revised casino taxes was in 1998, from a 22% to 25% range to a flat 25%.
Comparatively, casinos in Macau are taxed 38% to 39% while Singapore imposes a 5% tax rate on the VIP segment and 15% on the mass market segment.
Number forecasts operators (NFOs) are subject to gaming tax and pool betting duties with the latter raised from 6% to 8% in 2010 while gaming tax has been left unchanged at 8% since 1998.
“If both are raised, it is likely that NFOs will lower their prize payout to offset the increase in taxes,” a gaming analyst said.
RHB said a potential hike in gaming taxes could dampen investor sentiment, which could cap the upside on the sector in the near term.
However, HLIB Research analyst Grace Chew believes it is unlikely that gaming taxes will be raised.
“Every one percentage point increase will mean a net tax gain of RM39.37mil to the Government. Despite the addition, it only contributes 0.02% additional revenue as the segment only accounts for 0.9% of Malaysia’s total taxes.
“Moreover, this is based on the assumption that casino patronage remains the same after the hike, whereas this may not be the case in reality,” she said.
Should gaming taxes be raised, Chew added that casino operators may look for an alternative to offset the increase in taxes, including reducing the commission paid to junket operators.
This could result in lower casino patronage, which would equate to lower gaming revenues and hence gaming tax revenue paid.
“As such, we believe a hike in gaming tax is unlikely after analysing all the factors,” she said.