A Macau junket trade group has submitted a letter to the city’s chief executive, Ho Iat Seng, requesting the government to waive partially an existing levy on commissions paid by casinos to junkets.
Veteran Macau-based junket operator U Io Hung, a representative of the Macau Gaming Promoter Professionals Association, told GGRAsia that the group had submitted the letter to Mr Ho on February 6. The group is now waiting for feedback from the Macau government.
Junkets – also known as gaming promoters – are licensed by the Macau government to promote VIP gaming in the city’s casinos. They are offered incentives to bring players to casinos, earning a commission on rolling chip turnover, with such commission capped at 1.25 percent.
Since the liberalisation of the city’s casino sector, in the early 2000s, that a withholding levy of 5 percent – which is due to the Macau government – is levied on commissions paid by gaming operators to junkets.
Until the end of last year, junkets were able to benefit from a legal provision allowing the Macau government to authorise a total or partial exemption from taxation on junket commissions or remunerations that were paid in kind, such as transportation, accommodation, food and drinks, and entertainment – leading junkets to being subject to a lower net tax rate. But following regulatory changes enacted from the start of this year, that is no longer possible.
Junkets are now urging the government to make use of a different legal provision, which already existed but had not been used since 2007, according to publicly available information. That provision allows the city’s chief executive to authorise a total or partial exemption, of up to 2 percentage points, from taxation on junket commissions or remunerations. That exemption, however, cannot exceed a total of five years.
“The Macau chief executive has the possibility to waive part of the levy on commissions paid to junkets. What we are urging the government to do is just that,” Mr U told GGRAsia.
The newly-established Macau Gaming Promoter Professionals Association has 50 industry members, including 11 licensed junket operators in Macau, according to Mr U.
There are currently 36 licensed junket operators in Macau, according to data published by the city’s gaming regulator in early January. But only fewer than one third of them are currently active in the market, and only half of the city’s six gaming concessionaires are working with junket partners, Mr U said.
As per Macau’s revised law on junkets – approved by the city’s Legislative Assembly in December – junket operators are allowed to earn a commission for their gaming promotion service, but are banned from sharing casino revenue in “any form” with the casino operators with which they work. The latter had been a common business model for junket operators in Macau up to last year.
With the end of the revenue-sharing business model and the change in the way the levy on commissions paid to junkets is applied, that means higher operational costs for junkets, Mr U said.
“With this levy on commissions, we’re also at a disadvantage”, he added, in reference to the fact that direct VIP – i.e., VIP operations directly run by casino concessionaires – is not subject to such a levy.
Under the revised legal framework that came into effect in January, each Macau junket is only allowed to partner with a single gaming operator.
In full-year 2019, prior to the Covid-19 pandemic, the VIP segment – including junket operations and direct VIP – accounted for 46.2 percent of the overall Macau casino gross gaming revenue.
The junket sector in Macau has since seen a major decline in business, triggered by higher regulatory scrutiny locally and in mainland China, the largest source market of VIP customers to the city’s casinos. That has coincided with the high-profile detention – in November 2021 and January last year respectively – of two of the biggest junket bosses: Alvin Chau Cheok Wa, of the Suncity Group brand, and Levo Chan Weng Lin, of the Tak Chun brand, on separate allegations of running illegal gambling operations.
