Acknowledging a handful of relief measures proposed by the government to ease the negative impact of the novel coronavirus, both large corporations and small businesses still hope the authorities can do more.
The government launched an array of measures at the end of January in an attempt to control the spread of the novel coronavirus (COVID-19), including a 15-day shutdown targeting casinos that has brought the city and its economic activities to a standstill. Furthermore, it has made good use of its robust financial reserve to get various initiatives ready to bull the economy, allowing local businesses to see the light at the end of the tunnel.
However, tax cuts and the issue of shopping vouchers worth a total of MOP 2.2 billions, among a series of relief measures, do not seem to be enough, and large companies like gaming operators as well as small- and medium-sized enterprises (SMES) all hope that the administration will dip deeper into its bag of tricks.
In light of the imminent negative impact of the epidemic upon the local economy — which has been sluggish, seeing a decline of 3.5 percent in the gross domestic product (GDP) in the first nine months of last year over macroeconomic factors like the slowing Mainland Chinese economy — the government proposed a basket of measures last month “to ease the financial burden on residents and businesses across sectors”.
These measures can be divided into five areas, including: tax breaks and cuts in administrative charges, financial assistance and interest subsidies for SMEs, medical coupons worth MOP 600 (US $75) each and waives on water and electricity bills for households for a period of three months, more vocational training for employees, and electronic vouchers (e-vouchers) to encourage local spending at local shops.
With regards to these relief measures, nine business associations led by the Macau Union Suppliers Association and the Industry and Commerce Association of Macau Northern District remarked in a public statement: “Although the government has recently rolled out various measures to support and help the local SMEs, we expect that the Macau economy will not be able to recover in a short time period, given the extensive scale of this epidemic across the nation.”
“[We] hope [the government] can provide more material support to local SMEs staying afloat during this hardship”, the statement read. The nine groups suggested that the amount of interest-free loans provided by the government’s SME Aid Scheme could be enhanced to MOP 1.5 millions from MOP 600,000; plus, the three-month water and electricity bills waiver for households should also be applied to SMEs. Moreover, they proposed providing one-off subsidies for businesses at the end of the epidemic and other measures.
While acknowledging the government’s initiative to assist SMEs, Fong Kin Fu, president of the Federal General Commercial Association of Macau’s Small and Medium Enterprises, thinks that the tax breaks offered by the government — for instance, a deduction of up to MOP 300,000 in the net profit tax for 2019, which 2,970 companies are expected to benefited from — prove to be but little help at the moment.
“The biggest problem for SMEs now is the severe shortage in liquidity”, he said. “Some SMEs are now in a sort of ‘life or death’ situation – without sufficient liquidity they might close down soon.”
Mr. Fong also suggested that the government could provide one-off subsidies for SMEs, which are vital to their survival, as well as waiving part of their electricity and water bills. Nevertheless, in spite of the current turmoil, he strikes for his positivity about the future.
“We’re not talking about any fundamental problems in the economy, rather about the short-lived impact of the epidemic”, he said. “Given the resilience of Macau’s economy, the recovery could come soon, possibly in a few months.”
One of the highlights of the relief measures rolled out by the government is the e-voucher — a stored value card worth MOP 3,000 issued by Macau Pass, S.A. — that each permanent resident will receive once the current epidemic has come to an end. According to the authorities, residents could spend as much as MOP 300 a day at local shops with their stored value card, which has a validity of three months.
However, the chairman of the Travel Industry Council of Macau, Andy Wu Keng Kuong, claims that, with a daily threshold of MOP 300, SMEs in the tourism sector – namely travel agencies – could hardly benefit from these e-vouchers, because the amount of tourism products within this price range is very limited. He pinpoints that the government should come up with more measures to help tourism businesses and bull domestic demand.
Before the virus outbreak, the tourism industry had already lost its growth momentum in the second half of last year, due to the pro-democracy protests in nearby Hong Kong that lasted for months and kept many visitors away from the two special administrative regions, Mr. Wu noted. Although the city’s total visitation numbers managed to grow by over 10 percent in 2019 overall, they have been declining significantly since November of last year.
“The tourism industry has been struggling in the past six months, but we didn’t expect we would have to deal with another blow, which the novel coronavirus unfortunately brought along”, said Mr. Wu. Official figures show that the number of visitors to Macau in this Lunar New Year period decreased by over 78 percent compared with the previous year, and that visitation figures for February could drop further (90 percent).
“Many travel agencies have arranged their staff to take leave amid this epidemic, and a few have planned to reduce their headcount”, said Mr. Wu. “If the epidemic lasts for a long time, quite a few travel agencies might face closure.”
He proposed that the administration input more resources in overseas promotion about Macau as a tourism destination after the epidemic, to accelerate the recovery of the local tourism.
Life or death
In a bid to contain the virus outbreak, Beijing suspended tour groups visits to Macau at the end of January, and stopped issuing new permits for mainlanders wanting to visit the gambling enclave under the Individual Visit Scheme (IVS), until further notice.
“Even though there have been signs of stabilisation in the mainland, it’s still difficult to say when tourists will come back”, said Lei Cheok Kuan, chairperson of the Industry and Commerce Federation of Macau’s Central and Southern Districts.
He also noted that SMEs are now in a ‘life or death’ situation, with some businesses in the retail and dining segments slowly resuming normal operations. “In the neighbourhood districts, up to 90 percent of SMEs have resumed normal operations, but the business volume is only half of the turnover we usually see on normal days”, he said. “In tourist districts like the city’s downtown, many shops have not opened yet due to the scarcity of customers.”
For the purpose of fighting against COVID-19 by limiting the flow of people crossing the border, last month the administration unveiled a new regulation according to which non-resident workers hoping to enter Macau who have visited the mainland in the past 14 days prior to their entry have to undergo medical observation for two weeks in nearby Zhuhai. The officials have urged all local businesses, if they have the financial capacities, to provide temporary accommodation in Macau for those non-residents.
Mr. Lei believes that the government should provide spaces in government venues for the accommodation of some of those non-resident workers to help SMEs reduce their operating costs in this difficult time.
Not only do SMEs demand more assistance from the government, so do large corporations. Ambrose So Shu Fai, chief executive of gaming operator SJM Holdings Ltd, told Hong Kong Economic Journal last month that the authorities ought to consider providing tax breaks for casino operators too, to face this public health alert, with a reduction in the premiums payable on casino tables and electronic gaming machines, and in gaming tax rebate.
Currently, the city’s six gaming operators pay the administration a premium of MOP 300,000 per VIP table, MOP 150,000 per mass-market table, and MOP 1,000 per slot machine every year. Concerning the taxation, the direct gaming tax for each operator now is 35 percent of the gross gaming revenue.
The Hong Kong newspaper also quoted Mr. So saying that the government should be more understanding about the difficulties endured by the operators, adding that the ramp up of the gaming business depends on when the travel restrictions imposed upon the mainlanders would be lifted.
Following a 11.3 percent decline in the gaming revenue in January — before the imminent scale of disruptions caused by COVID-19 appeared to be more serious — gaming analysts now expect it to fall between 60 percent and 80 percent in March and April, should the travel restrictions be kept in place.
Lam Kai Kong, a director of the Macau Association of Gaming and Entertainment Promoters, also believes that the authorities could offer tax rebates for junkets — middlemen who help casinos entice gamblers and lend them credits to splurge on casino tables that will be settled later — for the rest of the year. The government currently imposes a tax of 5 percent on commissions paid by gaming operators to junkets.
“We would like to have more two-way communications with the government…so as to overcome this hardship together”, Mr. Lam added.
Government-Proposed Relief Measures in Five Areas:
1. Cuts in taxes and administrative charges
- A deduction of up to MOP 300,000 (US $37,500) in the net profit tax for 2019, expected to cover 2,970 companies
- Refunding 70 percent of salaries tax for 2018, with the threshold capped at MOP 20,000, benefiting 170,000 employees
- Deductions on salaries tax for 2020 will be raised from the current level of 25 percent to 30 percent, benefiting 180,000 employees
- Housing tax levied on 180,000 households for 2019, and a deduction of 25 percent of the housing tax for 25,000 commercial establishments
- Waiving the 5 percent tourist tax for hotels, bars, gyms, karaoke clubs and other tourism venues, benefiting 854 locations
- The license tax for all commercial vehicles will be refunded
- All types of administrative license fees and stamp duties for 2020 will be waived or refunded
2. Assistance to SMEs
- A provisional “SME Loan Interest Subsidy Scheme” was launched, with the government providing a 4-percent subsidy on the interest for a maximum loan of MOP 2 million for three years attained by SMEs from local banks
- SMEs that have been in operation for less than two years are also eligible for the government’s SME Aid Scheme
3. Supporting disadvantaged groups
- An additional round of medical vouchers worth MOP 600 for permanent resident valid for this year
- Waiving electricity and water bills for residential households for three months
- Families with financial difficulties will receive two more months of subsidies from the Social Welfare Bureau this year
4. Providing more vocational training for local employees, especially in areas related to infrastructure
5. E-vouchers worth MOP 3,000 for residents to spend at local shops