In a note following publication of the final draft – which is expected to be passed by the AL next week – Credit Suisse observed a change in the language pertaining to gaming tax that would see the current 39% tax including levies and contributions rise to 40%.

Specifically, the law revises wording that had previously stated concessionaires are charged “up to” 2% of GGR contribution to the public foundation in Macau and another “up to” 3% contribution to the urban construction, tourism and social security fund. In practise, the amounts currently charged are 1.6% and 2.4% respectively, a discount of 20% on the maximum charges. The 2.4% is reduced to 1.4% for SJM in recognition of their ongoing dredging of waterways in Macau.

The revised gaming law removes the wording “up to” in the cases of both charges, making them now a fixed 2% and 3%, effectively increasing the total charge from 4% to 5% of GGR. This is in addition to the 35% special gaming tax.

Credit Suisse said, “Using 2019 level as a base and apply[ing] an additional 1% of the GGR as an additional gaming [charge], we estimate that the EBITDA impact would be around 4% for the industry. Given that Macau operators are still under financial pressure, and even [assuming] GGR [is] to gradually recover next year, the benefit of operating leverage may not be optimal until 2024/25. As such, the impact could be potentially higher than 4% initially.

The investment bank went on to note, “To diversify the player base, the new gaming law (in clause no. 23) allows a possible cut by up to 5% of GGR (removal of the levies) collected from foreign gamblers (i.e., ex-China, Macau, HK and Taiwan). Effectively, the GGR generated from foreign players could be taxed at [a low of] 35% instead of 40%.”

“That said, there may be operational difficulties for the casinos to properly segregate the foreign gamers and the Chinese ones [and] we estimate that [foreigners’ historical contribution to GGR] is immaterial at 2-3% of the total industry GGR.”