The Trade, Industry, Energy, SMEs and Startups Committee of South Korea’s National Assembly has agreed upon a revision of the law that would see the license of the nation’s only casino for locals, Kangwon Land, extended by 20 years.
The revision to the Special Law on Development of Abandoned Mining Area, pending final approval at a Plenary Session on Thursday, seeks to extend the expiry of Kangwon Land’s current license from 2025 to 2045, in return for a greater slice of the pie through taxation.
Such tax would see the current taxation model adjusted to apply a 13% direct tax on GGR rather than the current 25% on profit before tax (PBT), effectively increasing the rate charged on PBT to around 31% on a like-for-like basis, according to investment bank JP Morgan. Kangwon Land also pays, and will continue to pay, the same 10% standard gaming tax on GGR charged to all casino operators in South Korea.
The new rules are likely a direct response to a decline in taxation revenue in 2020 due to Kangwon Land printing a KRW275.88 billion (US$249.7 million) loss for the year as a result of COVID-19. By taxing GGR rather than profits, the government can all but guarantee some form of revenue from Kangwon Land each year.
JP Morgan’s DS Kim and Derek Choi said Wednesday that the tax hike should come as no surprise given the mining fund rate “has gone up every time casino expiry has been extended … from 10% of PBT to 20% in 2005, and further to 25% in 2012.”
Located 150 kilometers (93 miles) from Seoul, Kangwon Land was borne out of Korea’s conversion to gas and oil for energy, leading to the closure of mines in Gangwon province in 1989. Legislation in 1995 encouraged redevelopment of abandoned mining areas, prompting local, provincial and national authorities to found Kangwon Land Inc, which is 51% government owned and overseen by the national Ministry of Knowledge Economy.