AllianceDBS Research went on to affirm that a tax hike will have a greater impact to NFOs than Genting Group should it happen.
KUCHING: AllianceDBS Research Sdn Bhd (AllianceDBS Research) believes there will be no tax hike for gaming players in the upcoming Budget 2017 to be tabled on October 21 in spite of general consensus expecting said hike.
Given that the upcoming Budget is expected to be largely people-friendly with the possibility of snap elections sometime in mid-2017 while maintaining its fiscal consolidation commitment, AllianceDBS Research observed that investors are increasingly inquisitive about the potential impact of sin tax hike on the gaming sector.
“We are not surprised by the rising concerns, as lifting the tax on the gaming players is viewed as one of the avenues for the government to increase tax revenue without causing public outcry,” it said in a pre-Budget note yesterday. “Furthermore, considerable time has passed since the authorities last implemented a tax hike for the sector.
“The last time the government standardised the 25 per cent casino duty for domestic casino operator, the Genting Group, was back in 1998; while gaming tax and pool betting duty for number forecasting operators (NFOs) were raised to eight per cent in 1998 and 2010, respectively.”
Despite the rising concerns, fthe firm believe that there will be no tax hike for the gaming players in the upcoming Budget.
“Our stance is premised on the fact that the Genting group has helped to pump prime and create jobs for the domestic economy through its multibillion Genting Integrated Tourism Plan (GITP), which will directly/indirectly increase contributions to government coffers,” it said. “Also, prospects of number forecasting operators (NFOs) remain challenging, particularly with the intensified competition from illegal NFO activities.
“As such, hiking tax on this segment could in in fact lower its tax revenue collection, and gaming-related tax revenue (excluding corporation tax) is estimated to contribute less than oen per cent of the government’s total revenue in 2016.
“Therefore, the imposition of a higher tax rate on the sector may not boost the government’s tax revenue significantly. Furthermore, Act 65 of the Gaming Tax Act 1972 allows the government to impose a higher tax rate beyond the Budget period.”
AllianceDBS Research went on to affirm that a tax hike will have a greater impact to NFOs than Genting Group should it happen.
“Should the government decide to hike gaming-related tax in the upcoming Budget, which we deem unlikely, our sensitivity analysis shows that a one per cent increase in casino duty will lower Genting Bhd and Genting Malaysia Bhd’s forward earnings by about one and three per cent respectively, with no material impact to our target prices and recommendations.
“On the other hand, a one per cent increase in gaming tax/betting duty could reduce Berjaya Sports Toto Bhd and Magnum Bhd’s forward earnings by about six and seven per cent, respectively. It also poses downside risks to our recommendations and target prices for the NFOs.”