Macau will see tax revenues drop by 80% with the exit of Junkets

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Posted: Jan 4, 2022, 6:21 p.m.

Last update on: January 4, 2022, 6:21 a.m.

With casino junkets possibly considering their Macau run to an end, the income they once provided will be drastically reduced. The government forecasts a loss of nearly 80% of the segment in fiscal year 2022.

Macau Galaxy
Galaxy Macau Casino in Macau, one of the many breaking ties with the junkets. The break-up could cost the city up to 80% in tax revenue from the junket segment (Image: Asia Times)

The Junkets have been an integral part of Macau’s gaming industry for years, but that changed abruptly late last year. There had already been talk of junkets losing favor last year. The debacle surrounding former Suncity boss Alvin Chau has accelerated the problem.

Analysts predicted that the loss of the junkets would have a bigger impact on the city than on the casinos, and this claim has been confirmed. When the Macau Financial Services Bureau (FSB) released the new fiscal plan for fiscal year 2022, it clarified the magnitude of that impact.

The FSB report shows the city will collect around MOP 43 million ($ 5.35 million) in tax revenue from the money casinos pay junkets through commissions. This is 79.5% less than what is estimated will have been collected when final figures for fiscal 2021 are provided.

Macau has constantly revised its budget figures over the past two years, thanks to COVID-19. For 2020, casino revenues have plummeted as gambling properties have been closed for months at a time. By the end of this fiscal year, the city had lost millions in tax revenue from gambling.

He also received only MOP 66.54 million (US $ 8.27 million) in tax revenue from junket commissions. This is 68% less than what he had forecast at the start of fiscal 2020.

More losses could be to come

Junket operations in Macau have been on the decline for years. In 2013, there were 235 licensed junkets. That number fell to around 100 in 2019. At the start of 2021, there were only 85.

In December, that number fell further after casino operators admitted they were breaking away from VIP promoters. Galaxy, Melco, MGM, Sands, SJM, and Wynn all saw a future that isn’t so much about junkets.

Despite the shift in focus, Macau’s gaming industry shouldn’t be turned upside down. Casino operators were already prepared to face a reduction in junket-related VIP activity in favor of mass gambling. It is also possible that the junkets will continue to feed players in Macau, but under a different business model.

A renaissance of junkets could emerge

Edmund Loi Hoi Ngan, associate professor at the Center for Research on Social, Economic and Public Policy at the Macau Polytechnic Institute, sees the junkets remain. He believes the pressure on the junkets will allow them to reappear as “travel agencies”, according to In Asian games. This is also more beneficial for Macau’s economy.

The IRs are already there and as long as the clients are not organized to come (by operators or promoters), it is a normal operation. That way the line is drawn so that everyone is clearer, ”says Edmund Loi.

By changing the way junkets operate, Macau’s gambling operators can show the city (and, in turn, China) that it is responding to concerns about capital movements. Law expects the industry to reduce its reliance on VIPs and increase non-gaming components. It will also appease government officials.

He adds, “Countries like Singapore, Thailand, Malaysia, South Korea and Japan are not opposed to cross-border gambling. The paths for the junkets are not completely blocked, as long as they stay away from mainland China. I think the result is very clear.

Loi is also optimistic about Macau’s rebound in 2022. The city added 44% to its 2020 revenue in 2021, and this year could bring more. He calls Macau’s gaming market “the most promising”. He explains, “The reason I’m optimistic about Macau is that I can’t find a better place. “

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