A proposal that sought to double the gross gaming revenue (GGR) tax in South Korea’s Jeju Island has been rebuffed by the national government in Seoul, Union Gaming Securities Asia said on Monday.
Authorities in Jeju were proposing a gaming policy package that would see the taxation on GGR increase from 10 percent to 20 percent, according to Union Gaming. Additionally, Jeju government also wants to implement “three-year license renewal audits” and to impose restrictions on the transferability of casinos licenses.
The brokerage did not provide any details on why the proposal was turned down.
Jeju island may be considered a self-governing province that is able to run its own casino-related development programs, but it still needs to get approval from the national government in Seoul on certain policy matters such as modifying tax rates.
“We believe that the national government quite possibly rejected the call for higher taxes in Jeju as it does not want to scare off billions of dollars of integrated resort-related capital either already under construction or moving towards construction,” Union Gaming analyst Grant Govertsen said.
According to the analyst, the rejected gaming policy is “good news” for Genting Singapore “as it moves forward with construction of Resorts World Jeju.”
“[The gaming tax hike rejection] is also good news for other pipeline projects in Jeju… Finally, the eight incumbent casinos benefit from this ruling, including Bloomberry’s Jeju Sun casino,” Govertsen said.
The first phase of the $1.8 billion Resorts World Jeju is set to open in 2017. Another project for South Korea’s holiday island is Lotte Tour Development’s foreigner-only Dream Tower, which is slated to open in the second half of 2018.
Effective tax rate going up
Despite being stymied by the national government, the Jeju government is reportedly moving forward with another change—one that doesn’t require an approval from Seoul.
Govertsen said the island is phasing out casino licensees’ ability to pay taxes on GGR after deducting junket commissions. Currently, Jeju casinos are paying 60 percent revenue share to junkets, higher than the 45 percent in Macau.
“By eliminating the ability to deduct junket commissions, the effective VIP GGR tax will go up to 10 percent, representing an increase of 150 percent,” according to the analyst.