Law of the land

Nine months after the consultation paper was issued, Macau’s new gaming law is finally approved and in effect. Government alongside legislators and analysts who support the new legislation hail it as pivotal to bringing about stability, security and diversification. Other experts cast a more sceptical eye, namely when it comes to the adjustments to indirect taxes and potential loopholes. The new law comes into being at a critical juncture, as the city struggles with unprecedented pandemic woes.

Not everything that was included in the September 2021 consultation paper lived to become the law of the land. Controversial proposals such as the appointment of a Government representative to the concessionaires or the prior authorization to distribute profits among shareholders were scrapped during the consultation period. After being approved at first reading, the gaming law amendment bill (amending the officially designated Law No. 16/2001- “Legal Framework for the Operations of Casino Games of Fortune”) went through further adjustments when subjected to a panel review in the Legislative Assembly (Second Standing Committee).

The controversy over the fate of satellite casinos took centre stage, with a number of local legislators calling for changes to the wording of the three-year grace period provision on the rule that all casino floors be owned by their concessionaires, something that was seen by observers as a potential death sentence for satellite casinos. At one point in time, there was the prospect of as many as eight satellite casinos shutting down by the end of June, raising the alarm over a possible loss of thousands of job posts. The Government eventually agreed to adjust the bill in a way that provides a lifeline for satellite casinos, and only two of these gambling venues have closed in June – President and Rio – the remaining 16 continuing to operate at least until December 31, in tandem with the six-month extension of the six casino concessions and subconcessions.

“Indirect” surprise  

When the final version of the bill was finally published in the Legislative Assembly website on June 15, six days before the final reading, a last-minute adjustment – which had hitherto not been in the public eye – stood out: under the new wording, “indirect taxes” would, in fact, increase by one percentage point compared with what is included in the current concession and subconcession contracts (see table 1). There is, however, a trade off, as the Chief Executive may reduce or exempt concessionaires from these contributions under certain reasons and circumstances, namely the ability to attract foreign patrons (see table 2).

The “eleventh-hour” alteration caught several observers by surprise. Gaming law expert António Lobo Vilela said he was surprised “especially because the decision was taken without any known scientific study”. Mr Lobo Vilela, a former senior advisor to the Macau Gaming Commission and member of the think-tank in charge of (co-)drafting the 2001 gaming law, raises concerns especially considering the current business environment: “The increase in the fiscal and para-fiscal burden on the gaming operators will make them weaker at a moment in time when they should be getting stronger.”

Gaming consultant Ben Lee believes the “unexpected” decision to increase actual indirect taxes in Macau by 1 percentage point will “create doubts and uncertainty” among those interested in new concessions, set to start from 2023.

The direct tax rate on gross gaming revenue (GGR) remains unchanged at 35 per cent.

This means that, without a reduction or exemption, casino companies will be paying 40 per cent of their GGR.

“If we look at it as an additional 1 percentage point from the current 39 per cent, it’s not a big deal,” Ben Lee, managing partner at gaming consultancy IGamix, told Lusa.

However, as the increase “came without warning”, potential new investors will wonder “what else could suddenly come,” he added.

Legislator Pereira Coutinho, however, tells Macau Business that he is “not at all surprised with the one per cent increase in ‘indirect taxes’, because gaming concessionaires can always benefit by running other side-businesses with huge advantages as they hold quasi-monopolies in business activities carried out in connection with gaming.”


“These percentages were defined taking into consideration our future needs […] In the past, our sources of visitors were not diversified, with mainland players representing 71 per cent of the total, 19 per cent from Hong Kong, 3 per cent from Taiwan and the remaining from the rest of the world” said Secretary for Economy and Finance Lei Wai Nong

Trade-off, but how?

The new law provides for a potential reduction of those contributions, up to a maximum of 5 per cent, “for reasons of public interest, namely for reasons of expansion of customer markets in foreign countries”.

Secretary for Economy and Finance Lei Wai Nong explained that the aim of these provisions in the new law is to help support the Macau SAR Social Security Fund and attract more overseas gamblers to the city.

Questioned by legislators during the second reading session on the gaming law amendment bill, Secretary Lei pointed out that these changes were intended by authorities to better face the “future challenges” the city’s economy will face under the current pandemic downturn.

“These percentages were defined taking into consideration our future needs […] In the past, our sources of visitors were not diversified, with mainland players representing 71 per cent of the total, 19 per cent from Hong Kong, 3 per cent from Taiwan and the remaining from the rest of the world,” Lei added.

“The central government has defined Macau as an international World Centre of Tourism and Leisure, so expanding overseas tourist sources is very important,” the Secretary for Economy and Finance elaborated.

Gaming consultant Ben Lee said he believed that this point reflected the central government’s growing desire to control capital flight through Macau.

Article 22, paragraph 3, of the new law reads: “The Chief Executive may, on consulting the Macau Gaming Commission, grant a reduction or exemption to concessionaires in the payment of the contributions  […] for reasons in the public interest, namely for reasons of expansion of customer markets from foreign countries, the specific terms being defined in a supplementary diploma”.

Some lawmakers and experts have raised doubts over the feasibility of this provision.

António Lobo Vilela takes a sceptical stance on the matter. “I really can’t see what objective criteria can be set,” he stressed, before asking: “Does the government believe patrons want to be tracked down at Macau casinos?”. Faced with this the legal expert on gaming concludes “the measure does not make any sense.”

Lawmaker Pereira Coutinho anticipates obstacles in implementing this provision. “Expanding to foreign markets to get tax exemptions will be difficult to implement and calculate, because gamblers can go to different casinos to play”.

During the Legislative Assembly session’s voting on the bill, on 21 June, legislator Ella Lei Cheng I asked how the government would evaluate the performance of concessionaires in expanding source markets. The Macao Federation of Trade Unions-affiliated legislator put forth further questions: what are the standards and benefits and under what specific circumstances will the Chief Executive reduce or exempt the concessionaire from paying the 5 per cent tax, and how can the adequacy of the social security funds be ensured?

According to Secretary Lei, the up-to-5 per cent reduction in exemption will be decided based on specific circumstances. The concessionaire will propose a rate and the government will decide, upon negotiation, he added.

Lei went on to say that only by improving business on the whole can the welfare expenditure, improvement of livelihood, and public resources be guaranteed.

Secretary Lei said the specific percentage of reduction or exemption will depend on the benefits a specific case brings, which will be evaluated as to whether it might merit a partial or a full exemption. The actual implementation will be regulated by administrative regulations.


“Expanding to foreign markets to get tax exemptions will be difficult to implement and calculate, because gamblers can go to different casinos to play”, said legislator Pereira Coutinho

Steadier ground  

On the whole, Mr Lobo Vilela notes that the main advantage of having this newly approved legislation is that “now everybody can see the big picture”, namely, “the gaming operators know the rules of the game for the coming decade”. This, “in some degree leads to the stability of the market and the gaming operators” and puts an end to the 41-week long “indefiniteness and autism shown by the Government”.

On top of the increase in indirect taxes, the legal scholar argues that another flipside of the new law is the “rent to be paid to the Macau SAR at the end of the concessions and subconcessions for the use of the casino premises that will revert”. All of this, he points out, “without safeguard clauses to allow the government the necessary leeway in troubled times such as those Macau is facing.”

Other voices regard the legislative overhaul of the city’s industry as a pivotal step to attaining a healthier, stable and more sustainable development model. Pro-Rector of City University of Macau and the Director of the Socioeconomic Development Research Centre, Professor Ip Kuai Peng, said he believes the new gaming law will gradually clarify the direction of the gaming industry’s development. Parts of the law he mentioned include the premise of safeguarding national and SAR security for the operation of casino games of fortune; the promotion of moderate economic diversification and sustainable development in the SAR, and cooperation with the SAR’s policies and procedures to combat illicit cross-border capital flow and prevent money laundering. In the long run, the gaming industry will focus on the mass gaming business and form a more stable, sustainable development structure, Professor Ip added as quoted by Chinese language newspaper Macao Daily News.


“I really can’t see what objective criteria [for tax reduction based on expanding to foreign customer markets] can be set (…) Does the government believe patrons want to be tracked down at Macau casinos?” said António Lobo Vilela

What’s next

What’s next The SAR’s gaming-related legal overhaul is not complete with the newly approvedgeneral gaming law (Legal Framework for the Operations of Casino Games of Fortune). In addition to future supplementary regulations on the criteria for reducing or exempting gaming concessionaires from indirect taxes, another key act is being reviewed by the Legislative Assembly:Thebill governing junkets, managementcompaniesand collaborators.

Allcurrent six gaming operators issued statements following the approval of the new general gaming law on June 21, and two days lateragain, on June 23, when the government and the gaming companies signed the contracts extending the concessions for about six months until the end of the year, as was widely expected.

The three concessionaires – Galaxy,Wynnand SJM–and thethree sub concessionaires – Venetian (Sands),Melco and MGM –welcomed and expressed supportfor the newly approved amendment to the gaming law and the six month extension. All six gaming firms added that they are looking forward to the upcoming public tender process, which will grant six gaming concessions for a maximum of ten years, with a possible three-year extension under special circumstances.

The new gaming law will gradually clarify the direction of the gaming industry’s development. The gaming industry will focus on the mass gaming business and form a more stable, sustainable development structure, said professor Ip Kuai Peng  

All eyes will now be on the public tender, which could be launched as early as inAugustwith the winning bidders being announced in November, brokerage JP Morgan estimates.

Mr Lobo Vilela, who was an advisor to the legal working group assisting the commission for the first public tender in 2001, noted that “the experience in the operation of casino games of chance will definitely play a pivotal role as it is the only way the government has to end up with all the current six gaming operators as the six new concessionaires should new bidders show up.”

The Government has meanwhile published the regulation regarding the upcoming public tender in the Official Gazette. In addition to requirements regarding the verification of the bidders’ suitability and their financial capability, the regulation specifies seven criteria for granting the concessions: 1) The amount of the variable part of the proposed premium; 2) Plans aimed at expanding customer markets in foreign countries; 3) Experience in operating games of chance in a casino or in related areas; 4) The interest for the Region from investments in gaming-related and non-gaming-related projects; 5) The casino management plan; 6) The proposal to inspect and prevent illegal activities in casinos; 7) The social responsibilities they intend to assume.