The Malaysian government is planning a major hike in the Malaysia gaming tax. The move is part of the plan to open more casinos in Kuala Lumpur (KL). But the move could dampen the growth of other potential casino developers in and around Kuala Lumpur and other major cities in Malaysia. This decision could affect both the Kuala Lumpur Development Corporation (KDDC) and the government of the nation. It’s ironic really that the same government which promised a rapid economic growth through the opening of brand new malls and sky-touching hotels is now on the verge of hiking the gaming tax at Malaysia’s largest and most prestigious casinos. Is this a ploy to protect their share of the booming gambling industry?
The Gaming Commission of Malaysia is scheduled to increase the existing gaming tax at Malaysia’s two biggest casinos – Genting Sports Complex (Genting) and the Malaysia Film Festival & Exhibition Center (MIFEC). The move comes after the Genting closed down its casino division, at least for the time being. In May, the Malaysian government will be hosting the opening of its new, major casino, the Genting Grand Hotel and Resorts.
There are mixed signals on the exact impact of the proposed gambling tax hike. Malaysian officials claim the hike will be very beneficial for the gambling industry, while experts say the benefits could be diluted. It remains too early to judge, as the proposed tax hike will need to pass through the House of Representatives and then be reviewed by the Senate before becoming law. However, the Malaysian Gaming Commission has already shown surprising signs of backing the proposal. Whether or not the Commission truly believes the gambling tax hike will have a significant impact on the Malaysian gambling industry is irrelevant – any increase in taxes is bad news for any business – it is important to note that gambling is a source of revenue for Malaysia.
In addition, the Gaming Commission also wants to introduce other types of taxes including import and export duties, auditing fees, and progressive taxation on business turnover and profits. These are meant to be separate from the existing gambling tax. Experts agree however, that these additional taxes may actually push small businesses further into bankruptcy and hinder growth. Given the dire state of the Malaysian economy (and the fact that all indications point to a recession), the addition of additional taxes and levies to the detriment of the gambling industry is unfortunately unavoidable. However, there is a way to soften the blow somewhat – the Gaming Commission plans to phase out the existing gaming taxes by 2021.
The way the Malaysian government frames the elimination of its gambling tax is by saying that the existing taxes on the sale and purchase of slots, table games, video poker machines, roulette, baccarat and other live games will be replaced with a single consumption tax. The argument goes that by removing the existing taxes, income from gaming transactions will be taxed on only one basis, and this new single tax will be considerably lower than the combined rates of the previous three taxes mentioned. This may seem like good news to the average Malaysian, especially given the fact that almost half the country is in deficit. However, experts question the wisdom of this measure as the impact of the new taxation system on the budget will be felt only after the new laws are implemented.
Experts believe that the revenue generated from the new tax should be used to reduce costs and increase revenue generation. The Gaming Commission estimates that the revenue from the new taxation scheme will not be enough to balance the current budget. Instead of providing revenue to the government, the revenues should be redirected to fund other important public works, such as education and healthcare. Even with the Commission’s attempt to use the revenue generated from the Malaysia casino tax hike to solve the financing problems for the Malaysian economy, critics are quick to point out the disastrous effects of such a move. Increased taxation will only force the government to redirect its limited resources to tackle more pressing issues.
Many political analysts believe that the way the Malaysian government has chosen to allocate the revenue generated from the casino’s tax hike is too hasty and does not make sense. They argue that it is illogical to allocate the bulk of the funds to the government while arbitrarily dinging the casinos themselves. Instead of gambling with the welfare of the people and their hard-earned money, the government should have prudently allocated the tax revenues towards better projects.
Another criticism of the Malaysia casinos tax hike is the lack of focus and concentration on reducing tax evasion. Though the Malaysian authorities claim that the tax collection drive is aimed at stopping ‘tax evasion’, most experts doubt that claim because no real measures to crack down on tax evasion have so far been announced. Casino owners and operators may agree to pay a share of the tax accrued, but they are still free to skimp on other areas such as asset management and administration. Moreover, the majority of tax evaders still cannot be traced and brought to justice, as most of the cases are based on ignorance rather than any criminal intent. As long as the government does not address these issues or lack the will to take action, the widespread anger and resentment towards the Malaysian tax authorities will only continue.
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