Questions Arise after Macau Presents New Tourism Tax Scheme

Macau is closing in on one of the largest gambling law reforms in its history. Casino operators are entering an unknown era, and changes to tourism tax laws could cause additional concerns.

Senado Square A UNESCO World Heritage Site
Senado Square A UNESCO World Heritage Site
Senado Square, a UNESCO World Heritage Site, in Macau. New tourist tax rates might alter the tourism industry. (Image: Macau Business)

Very soon, Macau lawmakers will reveal the final outline of its updated gambling laws. Casino operators in the Chinese SAR are already preparing for a significant shift in their operations as more is revealed about the changes.

The city’s Legislative Council just approved a bill that will impact those operations, as well. Inside Asian Gaming reports that lawmakers have updated the language that guides how Macau applies its tourism tax.

If they decide to implement the changes, it could lead to an increase in how much money businesses pay in taxes. It might also lead to a decrease in tourism, which would please some in Macau. The city has repeatedly sought ways to reduce mass tourism in favor of “high-quality” tourism.

New Taxes In Macau

The Amendment of the Tourism Tax Regulations changes the definition of what the tax covers. Currently, there is a 5% tourist tax added to “services rendered” at businesses such as hotels, health clubs and more. The new language updates this to read “goods and services rendered directly or indirectly by the relevant establishments and services.”

The inclusion of “indirectly” is vague and subject to interpretation unless the government weighs in. The Third Standing Committee of the Legislative Council discussed the amendment last Friday and is now waiting to receive clarification.

Lei Wai Nong, Macau’s Secretary for Economy and Finance, provided some guidance when the subject came up in Friday’s meeting. He asserted that the amendment clarifies the “attribution” of the tax; however, ambiguity remains.

The head of the city’s Financial Services Bureau, Iong Kong Leong, added that the tax regime applies to items such as purchases of minibar items in hotels, the sale of ferry and air tickets and others. However, it also applies to “newspapers and publications which may involve hotels,” according to Inside Asian Gaming.

Any link between newspapers and tourism is, at best, tenuous. Casinos already pay a gaming tax of 35%, with additional charges that raise the effective tax rate to around 40%. They already pay taxes on certain tourism-linked activities, but they may have to prepare to pay even more.

Tourism to Drive Macau’s Future

Macau made it clear a few years ago that, as important as casinos are for the city’s autonomy, international tourism of different categories is its future. Plans began in 2018 to diversify the city’s image and the new gambling laws include requirements that casino operators invest more to support Macau’s tourist infrastructure.

In 2018, Macau’s tourism tax was worth $116 million. The following year, this increased to $119 million, a trend that had been in place for a couple of years. However, COVID-19 decimated the city and tourism revenue only reached $20 million in 2020. Last year, it was down to $16 million.

Chief Executive Ho Iat Seng wanted, with the assistance of gaming operators, 12 large-scale sports events last year. This would be an effort to reinvigorate the tourism industry and continue to show Macau’s desire to diversify away from the impression it receives as primarily a gambling destination.

The plans fell through because of COVID-19, but exemplify the city’s goal of greater diversification. Macau continues to seek out ways to improve its financial stability. The new tax scheme may help, especially if the city reclassifies what falls under the tourism umbrella.

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