KUCHING: The implementation of the Goods and Services Tax (GST) system in Malaysia, effective April 1, 2015, is expected to hinder the government from raising gaming tax in 2015.
On this point, the government is expected to make some downward adjustments in gaming tax in Budget 2015 for players such as Genting Malaysia Bhd (Genting) to withstand competition from regional
casinos.
Analysts at TA Securities Holdings Bhd (TA Research) said currently, Genting Malaysia is paying 25 per cent of gaming tax which it said was moderately high in the region.
“In Singapore, the gross gaming revenue (GGR) generated from premium players will be taxed at five per cent while GGR from other players will be taxed at 15,” it compared.
“This is on top of the seven per cent GST imposed on the net win in deriving the GGR.
“Meanwhile in Macau, the gross gaming revenue is taxed at 35 per cent, plus two additional contributions of up to two per cent and three per cent for socioeconomic purposes.”
This led TA Research to reiterate its expectations of a minor adjustment in the gaming tax for Genting Malaysia to implement the GST system.
Otherwise, this may deal a serious blow to the company’s future capital spending as GST will have long term implications on profitability.
“Having said that, Genting Malaysia has embarked on RM5 billion 10-year development plan known as Genting Integrated Tourism Plan.
This development could possibly be scaled down due to the negative earnings implication of GST.”
Similarly, the firm also expected the government to make some downward adjustment in the gaming tax or pool betting duty imposed on number forecast operators (NFO).
Currently, NFO operators in Malaysia are paying two forms of sin taxes: a gaming tax of eight per cent on total amount of ticket sales and pool betting duty of eight per cent on net revenue.
The gaming tax has remained unchanged since 1998 while the pool betting duty was last revised from six per cent in June 2010.
Subsequent to the change in pool betting duty in 2010, NFOs received approval from the Ministry of Finance for the reduction in Special Prize payout from RM200 to the current level of RM180.
“For Berjaya Sports Toto Bhd (BJ Toto), the implementation of GST and the reduction in corporate tax rate to 24 per cent in 2016 will likely reduce our FY16 earnings projections by 5.4 per cent if the company makes no adjustment to the prize payout.
“However, we expect the government to adjust the gaming tax to mitigate the impact of GST.
“In our earnings model, a one per cent reduction in gaming tax rate and corporate tax rate in 2016 will fully offset the impact of GST.”