AllianceDBS says gaming tax hike unlikely

Big part: Genting’s GITP will increase revenue contribution to the Government, according to AllianceDBS. – Reuters

PETALING JAYA: There may not be any tax hikes for gaming players in the upcoming Budget 2017.

AllianceDBS Research said in a report that the Genting group’s key role in stimulating the domestic economy and creating jobs through the multi-billion ringgit Genting Integrated Tourism Plan (GITP) may be a reason for there not being a tax hike on the industry.

It said the GITP would increase revenue contribution to the Government.

The research house said should the tax on number forecasting operators (NFO) increases, revenue collection by authorities could be lowered because punters may switch to the illegal NFOs

It noted that even if a higher tax rate was to be imposed, tax revenue would not be much higher as gaming-related tax revenue, excluding corporation tax, had been estimated to contribute less than 1% of the Government’s total revenue this year.

The Government also has the ability to impose a higher tax rate beyond the budget period, in line with Act 65 of the Gaming Tax Act 1972.

As such, should the Government decide to increase taxes for the gaming industry during the upcoming budget, NFOs would be severely impacted.

“Our sensitivity analysis shows that 1% increase in casino duty will lower Genting Bhd and Genting Malaysia Bhd’s forward earnings by about 1% and 3%, respectively.

“On the other hand, a 1% increase in gaming tax or betting duty could reduce Berjaya Sports Toto and Magnum’s forward earnings by about 6% and 7%, respectively,” said AllianceDBS.

The research house added that it has been some time since the last tax hike for the gaming sector.

Gaming tax and pool betting duty for NFOs were raised to 8% in 1998 and 2010, respectively.

Meanwhile, the standardised 25% casino duty for domestic casino operator Genting was imposed in 1998.

AllianceDBS viewed a tax hike on the industry as publicly palatable.

“We believe that any potential near-term share price weakness in the sector due to budget concerns could provide opportunities to invest in Genting group. Additional gaming capacities arising from its GITP launches and the weak ringgit to attract more foreign tourists and local travellers, are expected to re-rate the stock,” said Alliance DBS Research.