Japan casino revenue tax rate to start at 30%, top out at 50%


japan-casino-tax-rateJapan’s would-be casino operators got a major shock this week on reports that the government will impose a gaming revenue tax that tops out at a whopping 50%.

On Tuesday, Japan’s Jiji news agency reported that the ruling Liberal Democratic Party and its junior coalition partner Komeito plan to include specific tax rates when the Integrated Resorts (IR) Implementation Bill is submitted to the Diet for consideration in the current session.

According to the government sources, the plan is to impose a 30% tax rate on annual revenue up to ¥300b (US$2.8b). The rate is significantly higher than the effective 7.75% Nevada casinos are required to remit, although lower (at least, initially) than the effective 39% rate paid by Macau casinos.

However, should an operator’s annual revenue exceed ¥300b, a 40% tax rate would apply on revenue over ¥300b but less than ¥400b ($3.7b), while revenue exceeding ¥400b could face a hefty 50% rate.

Japan’s government is ever mindful that the greater public is still somewhat leery of the potential negative effects of introducing casino gambling into Japan. The steep tax rates are therefore intended to ensure gambling harm mitigation programs don’t lack funding to perform their assigned tasks.

But Morgan Stanley analysts warned that the rates could discourage Japan’s eventual casino licensees from “investing too much on capital expenditure due to lower return on invested capital.”

Would-be operators are also reportedly not impressed by Japan’s proposal to limit local residents to three casinos visits in any seven-day period, and 10 visits within a 28-day period. The government has also proposed restricting local residents’ ability to gamble on credit and to require them to pay a Singapore-style casino entry levy.

Operators have also expressed reservations about Japan’s decision to restrict the total size of any resort’s casino floor to 3% of the resort’s total footprint, with a maximum casino floor area of 15k-square-meters, again, similar to Singapore’s two integrated resorts.

Japan’s current legislative session ends on June 20, and it’s widely believed that passage of the IR Implementation Bill must be preceded by separate legislation to spell out specifics of Japan’s plans to limit the casinos’ potential negative impact on society.