GAMING | Scholar points out potential tax loophole in local casinos
In a research paper published in the University of Nevada, Las Vegas (UNLV) Gaming Law Journal, Professor Jorge Godinho from the University of Macau (UM) has suggested that Macau’s progress in regulating the local gaming industry “has been slow since 2004.” He also mentioned several “gaps and shortcomings” in the regulations, and has specifically mentioned the practice of so-called “side-betting” or “multiplying.” The professor believes that these practices are potentially responsible for allowing casinos to avoid paying less tax than they should.
The UM scholar explained that the practice of “side-betting” or “multiplying” consists of “agreements between a third party and a patron whereby the amount formally credited is only a fraction of the real amount, which remains concealed.”
This means that when a patron is at the gambling table, he or she is not only gambling against the casino but against a third party as well. As a result, the winning or losing sum actually on the table will only be part of the reward or loss faced by the gambler.
Moreover, during a side-bet, the nominal sum on the gambling table can be multiplied as well. This means that the real value of each bet is different from that which is shown on the table.
Prof. Godinho pointed out that this “parallel betting scheme is not taxed, but goes through official casinos and follows the rules of the games.” Therefore, he suggested that the casinos could have “unwittingly” utilized the junkets to foster a “parallel untaxed betting scheme,” thus “[generating] a direct erosion of the tax revenue.”
The professor suggested that side-betting is hard to avoid, but emphasized that “efforts must be taken to mitigate these practices.”
Additionally, Jorge Godinho raised another issue for public contemplation, namely the profit-sharing agreement that allows parties to gain access to the market without being suitably investigated.
Furthermore, the scholar claimed that there is a lack of information “on enforcement actions adopted by [the Gaming Inspection and Coordination Bureau (DICJ)].” Even though the bureau has “taken appropriate actions,” it has not disclosed its findings, or the actions it has taken regarding these cases.
“Namely, there is no public data on penalties applied or licenses cancelled. This information would be helpful to assess the overall compliance of the industry with anti-money laundering regulations, and the level of impact [sustained by] the enforcement of the suitability requirements.”
Another issue raised by the professor concerns the fact that there is no “legal regime” available for the government to follow when they have to handle a situation in which a gaming concessionaire has failed to comply with relevant provisions, laws, or the concession contract. Although there are penalties and offences included in the contracts and laws, some of which suggest that a serious violation of the regulation or terms of contract can lead to the revocation of the concession, he believes that there is still a need for further regulation to be extended to other issues. This, Jorge Godinho pointed out, is “long overdue.” “The current situation is one where the Government does not have the means to punish minor offences,” he remarked.
In conclusion, the UM scholar suggested that although Macau played a leading role in changing the perception of gambling in Asia, as well as in the spread of integrated casino resorts throughout the continent, this has also become a problem for the city. This is ultimately because there is no significant source of revenue other than the gambling industry.
Macau can continue to maintain its position as the largest gaming market when facing future competition from other Asian countries and regions – even from mainland China. However, the scholar has warned that the city will, without doubt, reach its peak due to the constraints in land, and due to and limitations in infrastructure and transportation. JPL
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