Dredging it all up

The gaming concession contract of Sociedade de Jogos de Macau SA (SJM) includes a special term: the company is in charge of dredging the city’s harbour and other maritime obligations. In exchange, it gets corresponding tax benefits – one per cent gaming tax exemption.
Legislator Ella Lei Cheng I submitted a written enquiry urging the government to reconsider the measure’s rationale when reviewing the gaming concession contracts, as the one per cent tax equalled more than MOP900 million (US$112 million) in 2013, which is considerably more than the government would have paid for the dredging services alone, according to the legislator.
At present, casinos need to pay a direct tax of 35 per cent on gross gaming revenues. The law also states that they are obliged to pay a further two contributions of up to 2 per cent for ‘cultural, social, economic, educative, scientific, academic or philanthropic actions’ through the Macau Foundation and up to 3 per cent for ‘urban development, tourism promotion and social security.’ The maximum tax is therefore 40 per cent, although it is currently set at 39 per cent.
Now, gaming operators pay 1.6 per cent to the Macau Foundation and 2.4 per cent for ‘urban development, tourism promotion and social security’ (1.4 per cent in SJM’s case, which, in exchange, is responsible for dredging and other maritime obligations).
The one percentage point tax break might have been worth MOP300 million when the gaming concession contract was first signed but with the development of the gaming industry in the SAR the amount that the government has spent on dredging services equalled MOP806 million in 2012, and over MOP900 million in 2013.
“If the gross gaming revenues continue to be on a high level, that means that the government is paying a huge chunk of public money on the dredging services,” said Ella Lei at a press conference earlier this month addressing the issue. “We think this provision of the contract needs to be reviewed.”
This issue came to the surface as more than 20 former employees at the dredging department of the Sociedade de Turismo e Diversões de Macau, SA (STDM) sought help from the legislator for compensation of overtime and annual leave.
SJM’s parent company STDM was in charge of the dredging work. In 2013, the responsibility for keeping the city’s waterways navigable was transferred to Macau Dredging Services Ltd. – a wholly owned subsidiary of SJM Holdings Ltd. This move was said to be in accordance with SJM’s strategy as listed on the Hong Kong Stock Exchange.
Some former employees of STDM said that when their old contracts were terminated, they received compensation for having been laid off but the remaining compensation for overtime and annual leave went unpaid. They hope for a more reasonable solution.
Ella Lei said dredging is a paid public service, and urges the government to better supervise the gaming operator in providing its employees with better benefits.