Besides the standard 35% tax on gross gaming revenue, casino operators in Macau, under the new rules, are due to pay an additional 5% floor “rent” fee. In addition to the casino operators, the new rules affected the once-profitable junket operators as well. Per the new regulation, the junkets are due to pay a 5% commission tax. This additional payment is applicable for all junket operators on a monthly basis and is expected to significantly impact the sector.
Although the new tough regulation came into effect in January, the additional 5% commission tax for junkets wasn’t enforced. That was until junket operators started receiving notices that the new commission tax is due to be paid, numerous local media outlets revealed.
Besides the commission tax, the new tough regulations in Macau restricted junkets from joining forces with different casinos. Under the rules that came into effect in 2023, junket operators can team up with one out of the six casino licensees. Previously, that wasn’t the case as the junket operators were allowed to team up with multiple casinos.
Number of Junkets Decreases
The crackdown on the profitable junket operators dates back to 2021. This is when Alvin Chau, the ex-CEO of Suncity Group, a major player in the market, was arrested. Them after a long trial and investigation, the court concluded that the former CEO was involved in a massive criminal organization that eluded taxes of some $1 billion. Consequently, late last month, Chau was sentenced to 18 years in prison.
Since the crackdown on junkets started, there has been a notable decrease in the number of operators. A decade ago, there were more than 200 junket operators but that number has been rapidly declining. Back in 2019, there were 100 licensed junkets and in 2021, that number decreased to 85. Keeping the same trend, in 2022, licensed junkets decreased to 46, while this year, their number shrank further to only 36, a report released by IAG reveals.
Keeping in mind the negative impact of the pandemic, the additional tax and the continuously declining number of junkets, the new tax may significantly impact the sector. In fact, Nikkei Asia revealed that the additional tax revenue can put some junket operators out of business. The leader of a junket company who decided to be anonymous explained that the 5% commission tax was previously waived. However, the leader warned that the latest enforcement of the tax can “kill” the income of junket operators.