GGRAsia – Singapore budget no material impact on casinos: Maybank

Singapore budget no material impact on casinos: Maybank

Feb 19, 2020 Newsdesk Latest News, Singapore, Top of the deck

Singapore’s government budget for 2020 – officially unveiled on Tuesday – is unlikely to have a material impact on the finances of the city’s two casinos. That is according to a note from Samuel Yin Shao Yang, associate director research at Maybank Investment Bank.

“Among the slew of measures announced… only two seem to directly impact Singaporean integrated resorts,” said Mr Yin.

Singapore has two casino complexes: Resorts World Sentosa, operated by Resorts World at Sentosa Pte Ltd, a unit of Genting Singapore Ltd; and Marina Bay Sands, operated by Marina Bay Sands Pte Ltd, a unit of United States-based Las Vegas Sands Corp.

Mr Yin noted that the 2020 budget included a 10-percent property tax rebate for integrated resorts. He added that the previously announced hike in the Goods and Services Tax (GST) to 9 percent from 7 percent would “be delayed from some time between 2021 and 2025 to some time between 2022 and 2025”.

Mr Yin said the property tax rebate was likely to translate into a cost saving of SGD3.8 million (US$2.7 million) for Genting Singapore for full-year 2020. “This constitutes only 70 basis points of our full-year 2020 core net profit forecast of SGD539.1 million,” stated the Maybank analyst.

Commenting on the delay to the GST hike, Mr Yin said it appeared “to be a delay in effective gaming tax rates”.

He pointed out that Singapore’s effective gaming tax rates are current set at 12 percent (5-percent casino tax plus 7-percent GST) for VIP gaming, and 22 percent (15-percent casino tax and 7-percent GST) for the mass-market segment.

The Maybank analyst said the institution was expecting the 50-percent casino entry levy hike announced in April last year “would be rolled back a tad” by the government, with an announcement to be made during the 2020 budget presentation, which eventually did not happen. That was a reference to a 50-percent hike – to SGD150 – on the daily entrance tax Singaporean citizens and permanent residents need to pay to be allowed inside a local casino. The annual levy was also increased at the time, to SGD3,000 from SGD2,000.

“Hopefully there will be more aid and relief [measures for casino resorts] post-budget 2020,” added Mr Yin.

According to several reports, casinos in Singapore have been navigating a steep fall in business after a sharp decline in clients, due to a contraction in consumer sentiment and negative impacts from the measures implemented to prevent the spread of the novel coronavirus Covid-19.

The Singaporean government announced last year it had agreed to the expansion of the city’s two integrated casino resorts. In return for their investment – an aggregate of SGD9 billion – the respective operators would continue to hold a duopoly on casino gambling in the city-state through 2030, it was announced at the time.

The changes to Singapore’s legal casino framework announced at the time included the introduction of a tiered casino tax structure with higher tax rates than currently in place. According to the new system, to become effective on March 2022, the annual tax rate on mass gross gaming revenue (GGR) will go from a flat rate of 15 percent to a rate of 18 percent for the first SGD3.1 billion of GGR collected by the casino operator. Mass GGR in excess of SGD3.1 billion will be taxed at a rate of 22 percent, the government announced.

According to the new tiered model, the first SGD2.4 billion of premium – or VIP – GGR will be taxed at a rate of 8 percent; premium GGR over that figure will be taxed at 12 percent.

The government said the new tax structure would be fixed for a 10-year period, starting in March 2022.