Vietnam’s government is considering a draft decree allowing local citizens to enter casinos, a move that could be beneficial to casino operators in the country, says Donaco International Ltd. The move however could mean new taxes being imposed on any casinos allowed to offer gambling to Vietnamese nationals, the firm said in a filing following its annual general meeting.
The policy might involve a “trial location”, Australia-listed Donaco said in the statement. It added: “Potential tax changes may apply to properties allowed to admit locals.”
Donaco operates a casino hotel called Aristo International (pictured) in Vietnam’s northern province of Lao Cai, bordering China’s Yunnan province.
Vietnam has a population of around 92.5 million. The country has several casinos, but authorities prohibit Vietnamese people from casino gambling within national borders, unless they hold a foreign passport.
Even if new taxes are introduced to any casinos allowed to serve locals , the net effect of having locals in the customer mix would be “very positive” for Aristo, Donaco’s chief executive Joey Lim Keong Yew said in the filing.
“Timing and detail of potential changes is uncertain, but would benefit Aristo by allowing development of local mass market,” Mr Lim added.
According to local media reports in August about the draft decree, casinos would be open to Vietnamese nationals aged 21 and over, who would still have to meet certain background and financial criteria that the government would define at a later date.
“[The] Latest proposal is that locals may enter if they possess an APEC Business Travel Card, rather than a minimum level of monthly income (which would be difficult to verify),” said Donaco’s CEO. APEC, also known as Asia-Pacific Economic Cooperation, is a club of 21 Pacific Rim jurisdictions seeking to promote free trade and cooperation across the area.
Mr Lim also said that due diligence on a planned acquisition in Cambodia is progressing. Donaco has already signed an exclusive term sheet to acquire what it says is a significant gaming and hospitality business in Cambodia.
“The business is highly profitable, with a very good market position and generates strong cash flows,” said Mr Lim.
The firm did not provide further details on the acquisition target, saying only that the acquisition price “will be 6x EBITDA [earnings before interest, taxation, depreciation, and amortisation] for 2014”, through a mixture of cash, debt and equity for the vendor.
Donaco is aiming to diversify its business and customer base with the planned acquisition. The customer base of the target company “is not dependent on Chinese visitation,” the casino operator said.
“Management is well aware of potential changes in Vietnam to allow locals to gamble. Even if this change occurs, it would not have a negative impact on the proposed acquisition, which is a compelling opportunity,” Mr Lim said in the statement.
In recent reports, it was said that the personal income tax on earnings derived from casino winnings is likely to be scrapped in Vietnam. But the loss to the country’s tax authorities – estimated at US$9.52 million annually – is likely to be offset by a 5 percentage point increase in what’s known locally as special consumption tax, which applies to gambling.
