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Possible increase of gaming tax in Malaysia

The Malaysian government is considering increasing gaming tax revenue for casinos in the upcoming budget for 2014 in an effort to reduce the country’s financial deficit.

According to The Star Malaysian newspaper, the country’s budget deficit stood at 4.5% of gross domestic product in 2012, but the government wants to reduce the figure to 4% this year.

“We believe there is a possibility of an upward revision in gaming taxes when Budget 2014 is unveiled on October 25 as the government explores ways to beef up its coffers,” financial market research company RHB Research said.

RHB estimated that the Malaysia gaming sector contributed between R2.3 billion (€524 million/$700 million) and R2.7 billion in tax last year.

The Malaysian government has not revised casino taxes since 1998, when the rate was altered from a 22% to 25% range, to a flat 25%.

The gaming tax rate of 8% has not been changed for 15 years either.

Casinos in nearby Macau are taxed at between 38% and 39%, while Singapore imposes a 5% tax rate on the VIP sector and 15% on the mass market segment.

RHB warned that a potential hike in gaming taxes could restrict growth and HongLeong Investment Bank’s research division added that it was unlikely an increase would generate noticeable benefits.

“Every one percentage point increase will mean a net tax gain of R39.37 million to the government,” Grace Chew, an analyst at the bank, said. “Despite the addition, it only contributes 0.02% additional revenue as the segment only accounts for 0.9% of Malaysia’s total taxes.”

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