Inside Asian Gaming

INSIDE ASIAN GAMING | November 2010 32 In Focus A s we reported in our story ‘Direct Play’ in August this year, if Las Vegas Sands Corp (LVS) is going to convert a junket player to a direct one, it would rather do so in Singapore. There, VIP gaming revenue is taxed at 12% (5% VIP gaming tax plus 7% goods and services tax) compared to just under 40% in Macau. Recruiting direct VIP players may be the only option, because Singapore’s fastidious Casino Regulatory Authority has effectively barred Macau-style junkets from operating in the Lion City. In the absence of the junket middleman, LVS is also able to offer greater incentives to VIP players at its Marina Bay Sands (MBS) casino in Singapore than those at its Macau properties. In Macau, junkets ‘pull’ a maximum of 1.25% commission from casinos on rolling chips, keeping between 20 to 35 basis points in order to cover their margins, and giving the rest to players. In Singapore, MBS ‘pushes’ the whole of the 1.2% commission it offers on VIP chips to its direct players. In Macau, the rolling chip commission that an operator can pay a junket is currently fixed by law at 1.25%, following the price war that broke out in December 2007 that pushed the top commission rate to 1.35% overnight. Over in Singapore, where the lower gaming tax allows operators to offer more aggressive commissions, anecdotal reports suggest Genting at Resorts World Sentosa (RWS) is rebating as much as 1.4% to 1.5% to direct VIP players, (including high rollers from Japan). IAG sources also suggest Genting’s motive in attracting direct players from Malaysia to Singapore is the high gaming tax in Malaysia (25% for VIP and for mass play) and political uncertainty regarding Genting’s Malaysian gaming licence, which is currently being renewed by the Malaysian government on a rolling basis every three months, whereas its Singapore licence is guaranteed for at least ten years. From the operators’ perspective, it’s clearly potentially more profitable to have direct players doing most of their rolling in a low tax destination such as Singapore, rather than in a high tax destination such as Macau. On $100,000 worth of bets placed (roll) via a junket in Macau, assuming a win rate of 2.75% and less 40% government tax on the win and 1.25% of the roll going to the junket as commission, the casino would be left with $400. LVS said in a note to investors in June 2009 that its direct VIP play in Macau was 1.0 to 1.5 times more profitable than junket originated play. That would suggest LVS could retain from $800 to $1,000 in the above scenario were the bets placed under direct play. In Singapore, when a direct VIP player places $100,000 worth of bets, assuming a win rate of 2.75%, 12% tax and 1.2% rolling chip commission rebated to the player on his or her ‘roll’, the casino would be left with $1,220. Singapore dealers are also paid less, ingeneral, than theirMacau counterparts. It’s clear, therefore, that the economic benefit to a Singapore-based casino of direct VIP play is considerably greater than either Macau- based junket VIP play or even Macau-based direct play. In any case, although the middleman may be alive and thriving in Macau, it will be some time before he will make an official appearance in Singapore. “I am still convinced that the Macau -style junket reps will not submit to the probity checks and provide the information that the [Singapore] government will need to put them through the investigatory wringer,” said Mr Adelson in a recent LVS earnings call. “And even if they do, and even if there are some Macau-style junket reps that will do that, I don’t believe its going to be done this year at all,” he added. Taxing Times Singapore’s lower gaming tax rate makes it an attractive destination for direct VIP players The Macau VIP split Theoretical house win 2.75% 2.85% 3.00% Total amount bet by player (roll) $100,000 $100,000 $100,000 Gross amount won by casino $2,750 $2,850 $3,000 Macau govt tax @ 40% $1,100 $1,140 $1,200 Commission paid to Macau junket $1,250 $1, 250 $1,250 (maximum 1.25% of roll) Macau casino net win (after tax $400 $460 $550 and commissions) The Singapore VIP split Theoretical house win 2.75% 2.85% 3.00% Total amount bet by player (roll) $100,000 $100,000 $100,000 Gross amount won by casino $2,750 $2,850 $3,000 Singapore govt tax @ 12% $330 $342 $360 (5% VIP tax & 7% GST)* Commission (rebate) paid by $1,200 $1,200 $1,200 casino on player roll @1.2% Singapore casino net win $1,220 $1,308 $1,440 (after tax and commissions) Note * (Corporate tax is also levied on casino profits in Singapore at 17%)