Crown Resorts has accepted its fate that for better or for worse it will have to prove its reputation as a reliable gaming giant in Australia once again. The next two years will be challenging, but it all seems to be going well. However, the company is not exactly sure it understands the motivation behind the Victorian state government’s decision to raise the tax rate on the electronic gaming machines (EMGs) located on Crown Melbourne’s gaming floors.
EMGs in Focus for Crown Melbourne
The tax hike was proposed as part of an exclusive AU$30 million ($21.3 million) package released by the government which will go directly to helping manage the next two years of monitoring for the company and making sure it’s complicity with the prerequisites set out by the industry. The motivation, the government explains, is that there are already charities that pay a bigger tax on their EMGs compared to commercial casinos.
It would be only fair if Crown Melbourne was to do the same. The company does find the new levy, which is higher than the 31.57% tax rate currently, outside of a 1% community tax, to be a tad excessive though. The new rate purports that Crown must meet a tax rate of 46.7% on its EMGs, which is not ideal for the company.
According to Crown, the new rate would result in a loss of monthly revenue per machine ranging anywhere from AU$2,666 to AU$6,667 or $1,890 and $4,727 respectively. The company is also examining other price hikes, such as 51.7% or 60.67% which can impinge on competitiveness even further.
Different Rates Would Have Different Impact
Crown confirmed that it’s discussing the matter with the Victorian state government to reach a decision that benefits all parties involved. The company released a statement:
“Based on those discussions, Crown estimates that if the proposed arrangements were in place during FY2019 (being the last financial year prior to COVID-19), the impact on the earnings of Crown Melbourne would have been approximately AU$35 million to AU$40 million (US$24.8 million to US$28.3 million.)”
Crown Resorts ASX filing
Crown acknowledged that any change to the tax rate and its subsequent impact will have to be taken in stride and calculated based on variables that will change. The statement came as part of an ASX filing and confirmed that Crown and the government want to work together on creating the best possible way for implementing any changes to the regulatory framework that regulators deem necessary.
However, such implementation should always consider the implication for Crown Resorts and specifically its properties.