An increase to the service tax Malaysian businesses are required to charge on services offered is seen as a negative for casino operator Genting Malaysia, with a direct impact to be felt to the company’s bottom line.
Malaysian Prime Minister Anwar Ibrahim presented the country’s 2024 budget on Friday, which included a 2% increase in the service tax from 6% to 8%. The increase was made in lieu of introducing a Goods and Services Tax (GST).
In a weekend note, Nomura analysts said the service tax increase is negative for the gaming sector, specifically Resorts World Genting operator Genting Malaysia and its parent Genting Berhad.
“Note that gaming companies have historically absorbed the service tax on gaming activities, and so the increase in tax will affect their EBITDA margins negatively,” they wrote.
The analysts did, however, add that a 5% reduction in the entertainment duty on theme parks, family recreation centers, indoor game centers and simulators is a “marginal positive” for the Genting firms.
Nomura also pointed to initiatives aimed at boosting Malaysia’s tourism industries, including planned improvements to Visa-On-Arrival facilities, the introduction of social visit passes and the offering of Multiple Entry Visas to encourage tourists and investors, particularly those from India and China.
The Malaysia government is aiming to reach 26.1 million tourists by 2026, having already seen visitation triple year-on-year from 13 million through August 2023.
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