Inside Asian Gaming

INSIDE ASIAN GAMING | August 2011 8 own more than 200 machines in total. Many operators have fewer machines than are allowed by law. The average number per site is 24. The clubs are regulated by the Inland Revenue Authority of Singapore (IRAS)—Singapore’s taxman. Those regulations are enforced by the Police Licensing Department (PLD). Today there are fewer than 70 clubs in Singapore operating a total of around 1,700 gamingmachines. After the opening of ResortsWorld Sentosa and Marina Bay Sands in the first half of 2010, Singapore’s clubs saw their slot revenues fall by up to 60% in some cases. On average, the city-state’s licensed clubs saw a 35% to 40% drop in slot revenues. Four clubs closed down their machine operations. It was never the Singapore government’s intention that gaming machines would be a major revenue driver for the Singapore club industry. But in reality, over the four decades since slot club liberalisation, the profits generated from gaming machines had become the main source of income for all the clubs. The dramatic reduction in revenue following the launch of the casinos has created serious financial issues for them. Uneven playing field The main reason slot players deserted the clubs was that they quickly found they got more entertainment for their dollars at the casinos. The casinos can afford to give more money back to the players because from the moment they opened they faced a less onerous tax liability than the clubs. The casinos also offer a greater choice of slot product than do the clubs. The casinos between them operate around 5,000 machines. The clubs have only around one third as many. Casino slot machines are taxed at 15% of net gaming revenues, i.e., the amount after winnings to players are deducted. However, the taxation system covering clubs was—until May this year—an unusual method of calculation based on the coins in the drop box. This meant clubs had to use coins, and club slot machines had to lock up when any win of 200 credits was achieved. Prior to May, wins of 200 credits and above had to be distributed via a hand pay. Only then could the customer recommence play. The slot club tax burden was calculated on coins in the drop box, plus a notional increase of 37.5%. That total was then taxed at 30%. Hand pays could not be deducted from the taxable total. Thus, the effective tax rate statistically being applied to clubs was up to 60% of net gaming revenue—four times the rate applied to the casinos’ profits. “Singapore remains the only jurisdiction in the world I know of that taxes publicly- owned gaming—the slot clubs—at a higher rate than privately-owned gaming” Singapore’s casino regulations state no casino gaming machine may operate at lower than 90% RTP [return to player]—the percentage of slot handle that an establishment pays back to its players over a given amount of time. There are no formal technical standards for slot operations in slot clubs, and thus no statutory minimum for RTP. In practical terms, however, the clubs have found it necessary to operate at around 82% RTP in order to achieve adequate returns. This has created great differences in the club Singapore’s two casinos—Resorts World Sentosa and Marina Bay Sands—have been around for 18 months. Like many a modern boxer, they’re not afraid to showboat and they get heavy promotion from the money men. Market Outlook