HONG KONG: Macau is slapping a levy on junket operators that threatens to “kill” the casino hub’s once-thriving VIP business, industry insiders say.
The city has started enforcing a 5% tax on the commissions that casino operators pay to junkets, which bring high-roller gamblers, mostly from mainland China, to their venues.
The levy was formally put on paper when Macau revamped its junket regulations last year and, while it had informally been in play before then, payment had not been enforced.
In late January, however, junket operators were told they would have to start paying the tax from this month.
“The tax had always been waived in years prior,” one junket boss, who asked not to be named, told Nikkei Asia. “They are now enforcing it, which will kill our income.”
Two other junket operators confirmed that they had received the tax order.
Macau’s government did not reply to requests for comment.
The city’s new junket rules also limited operators to working with just one of six licensed casino companies, down from multiple players before.
Revenue sharing was also axed as Beijing cracked down on a once-lucrative sector that dominated the city’s VIP gaming segment.
In January, the territory’s gaming revenue, which includes VIP turnover, jumped 82.5% on year to 11.58 billion pataca (US$1.4 billion) – the highest monthly haul since the pandemic hit three years ago when the city began mirroring China’s strict zero-COVID policy.
After Beijing dropped the restrictions in December, Macau followed suit, including by ditching a mandatory hotel quarantine for visitors outside mainland China. Macau is the only place in China where casino gambling is allowed.
While VIP gaming accounted for about half of Macau’s pre-pandemic US$36 billion gaming revenue in 2019, that business declined during the global health crisis as tighter regulations throttled the industry.
The Jan. 27 tax notification to junkets came less than two weeks after the sector’s one-time leader, former Suncity boss Alvin Chau, was sentenced to 18 years in prison for running a criminal empire that Macau said bilked it out of US$1 billion in taxes.
The allegations against Chau largely focused on illegal under-the-table betting, or off-book wagers agreed upon between gamblers and junket operators.
Ben Lee, founder of the gaming consultancy group iGamiX, said the new levy will effectively result in double taxation for the VIP business. Casino operators’ gaming revenue is already taxed at a rate of 39%.
“What all the new measures will do is drive the junkets further under the table, legal prosecutions notwithstanding,” Lee said, referring to Chau’s case.
As of January, just 36 junkets received operating licenses, down from 46 last year and a peak of 235 a decade ago.
“Our hands are tied,” the junket boss said. “We can’t make any money and now we have to pay this tax. What’s in it for us anymore?”