Macau will see an 80% drop in tax revenue with the exit of the Junkets
Posted: January 4, 2022, 6:21 a.m.
Last update: January 4, 2022, 8:41 a.m.
With casino junkets perhaps looking to end their run in Macau, the income they once provided will be cut drastically. The government expects a loss of nearly 80% of the segment in fiscal 2022.
The Junkets have been an integral part of Macau’s gaming industry for years, but that abruptly changed at the end of last year. There had already been talk of the junkets falling out of favor last year. The legal debacle surrounding former Suncity boss Alvin Chau has accelerated the issue.
Analysts predicted that the loss of the junkets would have more impact on the city than on the casinos, and this assertion has been confirmed. When Macau’s Financial Services Bureau (FSB) released the new budget plan for fiscal year 2022, it clarified the extent of this impact.
The FSB report shows that the city will collect around MOP 43 million ($5.35 million) in tax revenue from the money casinos pay out to junkets through commissions. This is 79.5% less than he estimates to have been collected when the final figures for the 2021 financial year are provided.
Macau has constantly revised its budget figures over the past two years, thanks to COVID-19. For 2020, casino revenue plummeted as gambling properties were closed for months at a time. By the end of that fiscal year, the city had lost millions in tax revenue from gambling.
It also collected only MOP 66.54 million ($8.27 million) in tax revenue from travel commissions. That was 68% less than he had forecast at the start of fiscal 2020.
More losses could come
Junket’s operations in Macau have been in decline for years. In 2013, there were 235 licensed junkets. This 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 didn’t depend so much on junkets.
Despite the shift in focus, Macau’s gambling industry is unlikely to be upset. Casino operators were already prepared to deal with a reduction in junket-driven VIP activity in favor of mass gaming. It’s also possible that junkets will continue to supply players in Macau, but under a different business model.
A Junkets revival could emerge
Edmund Loi Hoi Ngan, associate professor at the Center for Social, Economic and Public Policy Research at the Polytechnic Institute of Macau, sees the junkets sticking around. He thinks pressure on junkets will allow them to reemerge as “travel agencies”, according to Inside the Asian Game. This is also more beneficial for Macao’s economy.
The IRs are already there and as long as customers are not organized to come (by operators or promoters) it is a normal operation. That way the line is drawn for everyone to be clearer,” said Edmond Law.
By changing the way junkets operate, Macau’s gambling operators can show the city (and, in turn, China) that it is addressing concerns about capital flows. Loi expects the industry to reduce its reliance on VIPs and increase non-gaming components. This 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 of the junkets are not completely blocked, as long as they stay away from mainland China. I think the bottom line is very clear.
Loi is also optimistic about Macau’s rebound in 2022. The city added 44% to its 2020 revenue figures in 2021, and this year could bring more. He calls Macau’s gambling market “the most promising”. He explains: “The reason I’m optimistic about Macao is because I can’t find a better place.