GENTING : Casino gaming tax to increase ?

Casino gaming tax hike possibly to follow PBD hike

The recent increase of pool betting duty (PBD) for number forecast operators (NFOs) might possibly be followed by a hike in casino gaming tax.

According to a research report released by Hong Leong Investment Bank Bhd (Hong Leong Investment), the PBD hike from six per cent to eight per cent from draws held from June this year onwards would directly and adversely impact the earnings of NFOs such as Tanjong Public Limited Company (Tanjong), Berjaya Sports Toto Bhd (Berjaya Sports Toto) and Multi-Purpose Holdings Bhd (MPHB).

The research house highlighted that Berjaya Sports Toto would suffer a more adverse impact, given that it was purely involved in the PBD sector. MPHB would also face a sizeable impact despite profit contributions from stockbroking and investment income at the holding company levels. This, it added, was mainly due to the financing cost in taking Magnum private.

Following the PBD increase, the research house speculated a similar move by the government on casino gaming tax, recalling an increase in casino gaming tax from 20 per cent to 25 per cent back in 2003. It expected Genting Malaysia to be affected by this, more so if the government decided to increase its gaming tax by the same quantum as the previous hike.

In addition, should the NFOs be allowed to transfer the high cost in the form of a lower prize payout, the impact faced by these industry players would not be straight forward.

This, highlighted the research house, would be dependent on several factors such as the amount to be transferred to lower prize payout and the illegals’ reaction towards this move.

It was recalled that back in 2003, when the NFOs increased their prize payout due to a standardisation of gaming tax and PBD among these players, subsequent sales were growing at high single-digits despite the matured market. This was thanks to the legalised NFOs taking market share from the illegals.

Consequently from this, Hong Leong Investment conjectured that the market share of NFOs could be impacted differently depending on the quantum of additional cost transferred to lower prize payout.

To mitigate the impact of these cost transfers on sales, the NFOs could possibly reduce the prize payout of the lower tier prizes, which is to reduce the payout for all prizes except the first prize.

The research house believed this to be the best alternative to reduce the impact, given that punters would normally ‘target’ to strike the top prize. Hence, should there be no difference in terms of the top prize money between legalised and illegals, the impact would be more muted.

Hong Leong Investment affirmed that NFOs would suffer from either lower profitability of losing market share to the illegals.


- by Borneo Post