S.Korea may slim any increase in casinos’ tourism fund payments, amid tougher trading: KB Securities

The South Korean government might decide not to raise to 15 percent, the ceiling on casinos’ annual-revenue contribution to a tourism fund, but instead opt for a lower figure. That is according to KB Securities Co Ltd analyst Choi Yong-hyun, in a recent memo. He cited concerns about industry profitability, and an increasingly competitive regional environment for casino operators seeking players, amid factors including taxation changes for Chinese citizens’ overseas assets. The Korea Casino Association has been informed the maximum contribution rate per South Korean casino towards the Tourism Promotion and Development Fund, could rise to 15 percent of annual revenue, from the current ceiling of 10 percent. On October 14, Shin Jong Ho, secretary-general of the trade body, told GGRAsia the proposal was yet to be formally tabled by the authorities. Analyst Mr Choi wrote in his update: “Considering recent discussions about raising the [tourism] departure tax, and [the] intensifying competition” that would follow MGM Osaka’s 2030 opening in Japan, “we believe the [South Korean] government is likely to adopt a more moderate approach than the proposed 5-percentage-point increase.” An academic study released on October 14 suggested the South Korean casino sector could see an outflow of as much as KRW2.32 trillion (US$1.72-billion) in annual gaming spend, once the MGM Osaka integrated resort (IR) with casino launches. KB Securities mentioned in its own memo, another perceived headwind: China’s tightening of taxation rules for its citizens’ overseas assets. In July, the Chinese government introduced a 20-percent tax on offshore trust income, requiring unpaid taxes to be declared by October 22. Mr Choi stated: “The regulatory changes have contributed to a decline in casino drop across Asia.” Drop is typically; the amount of money paid by players for chips at a gaming table. His brokerage nonetheless expects visitor numbers at South Korea’s foreigner-only casinos to continue growing, supported by factors including rising inbound tourism although it said the average amount of casino-customer drop remained at subdued levels. “Average customer drop has been affected by Chinese regulations, but could recover after the October offshore trust tax deadline and an expansion of rolling-chip tables targeting VIP customers,” said Mr Choi. China has traditionally been an important target market for South Korea’s foreigner-only casinos. The brokerage highlighted Lotte Tour Development Co Ltd, operator of Jeju Dream Tower, a facility with foreigner-only casino on the country’s holiday island Jeju, citing potential growth in Chinese-VIP visits. Though Mr Choi added: “Foreigner-only casino operator Paradise Co Ltd could be better positioned if Chinese regulations tighten further, given its more diversified customer base.”