Objeciones de R Dworkin

Casino industry analysts (CLSA (2015), IBIS (2015)) and our interviews with casinos point to the key drivers of casino performance – one short-term, the others longer term. The recent Chinese anti- corruption campaign has diverted some VIP gamblers from Macau into casinos in Australia, the Philippines and South Korea. The benefits are likely to be short-term. In the longer term expected growth in casino revenue is forecast to derive, inter alia, from the following key drivers:

 growing Australia’s share of the Chinese tourist market;  maintaining and then growing the share of the VIP market;

 growth in both the ‘mass market’, higher end premium play and the “mass market” tourism player (the last is sometimes called the ‘low-end grind’);

 growing the casino domestic market away from the local pub and club.

Planned investments in new integrated resorts are based on Australia achieving sustained growth in VIP Program Play, in international tourism and specifically with respect to casinos, a broad suite of policies and tax arrangements that maintain international competitiveness.

Tourism is a significant source of revenue for Australian casinos. In 2007/08, it is estimated that 1 million tourists made 2.4 million visits to Australian casinos. International tourists who visited casinos are reported to spend a total of $4.9 billion in 2007/08, equivalent to $4,940 per person, significantly more than $2,630 per international visitor who do not visit casinos (Tourism and Transport forum, 2009). Tourism and its claimed greater contribution to the economy has always been the basis of special concessions to ‘tourism destination’ casinos. Governments provide a range of concessions to casinos to assist them with their ‘competiveness’ in order for the economic benefits of casino developments to be realised.

Figure 8.7 shows the Australian VIP market share as at 2012 with Crown Melbourne dominating the market for VIP players. It is estimated that Australian casinos attract approximately 5 to 6 per cent of total VIP players although it may be (temporarily at least) some 7-8 per cent currently as a result of the outflow from Macau following the crackdown on corruption.

Figure 8.7: Australia’s VIP Market Share 2012

Source: Australian Financial Review (2013)

“Competitiveness” of Australian casinos with respect to VIP players is not simply related to tax rates. The boost in supply of casinos in the Asia-Pacific is a key challenge, diverting potential tourists to other locations. Industry analysts note that new supply will result in jurisdictions competing for VIP patrons on price by raising VIP commissions which will impact on margins:

“While Australia has lower VIP tax rates than most other gambling jurisdictions in the region, other operating costs are generally higher in Australia resulting in less margin to pay junket operators in VIP commissions as an incentive to bring players to your property.” (CLSA, 2015, p. 9)

We have seen, and are seeing, a very diverse suite of policy and tax reviews to boost the competitiveness of the Australian casinos, including:

 calls to increase the number of airflights and passenger capacity in Australia from China;  changes to visa arrangements such as for Chinese travellers, the provision of three year,

multi-entry visas;84

 calls for VIP travellers to have dedicated ‘fast lanes’ at customs at international airports;85

 cancellation of a “super tax” on VIP players at Crown Melbourne;

 generally lowering of tax rates on VIP players (e.g. Western Australia from 15 per cent (2003) down to 11 per cent (2014) and now 8 per cent) with the objective to increase the number of VIP players and hence expand the taxable base.86

84 _{Australian Financial Review (2015) “Chinese tourists get 3 year visas”, 11-12 April.}

85 _{The Australian (2014) “Crown wants VIPs to jump airport queues”, 23 December (p. 6).}

Table 8.7: VIP gaming tax rates

Tax Rates (per cent)

Macau 39

Korea 17

Philippines 17

Vietnam (net)(a) ₁₅

Singapore 12

Australia (excluding Perth) 10

Australia (Perth) 8

Las Vegas 7

Note: (a) 35 per cent gaming tax rate.

Source: CLSA (p. 9), based on company reports, World Bank own sources.

Table 8.8: VIP commissions rates

Commission Rates (per cent)

Malaysia 1.20 Macau 1.25 SkyCity 1.30 Cambodia 1.40 Crown 1.45 Philippines 1.50 Korea 1.60 Echo 1.52 Donaco 1.68

Source: CLSA (p. 9), based on company reports, World Bank own sources.

VIP gaming tax rates and VIP commission rates are shown in Tables 8.7 and 8.8.

The profit from VIP gamblers while significant is relatively small as a percentage of high roller bets (or turnover) and after the payment of junket commissions. For example, it was reported that in the six months to the end of December 2014 The Star Sydney lodged high roller bets of $22.3 billion on gambling tables but retained just $332 million (1.49 per cent) with a win rate falling to 1.33 per cent after it paid up commissions.87

VIP players in Crown Melbourne are taxed a flat fee of 9 per cent of their gross gaming revenue. This is lower than regular players who pay 29.85 per cent on EGMs and 21.25 per cent on table games. The Star Sydney, Australia’s second largest VIP player market faces a flat tax rate, an effective rate of 10 per cent of gross gaming revenues, lower than the single tax rate of 16.41 per cent for regular players and exempted from the ‘super tax’ for regular players (1 per cent for each $ 6 million increase in gross gaming revenue above $682 million up to a maximum of 38.81 per cent).

Figure 8.8 depicts the subsets of VIP players classified by Crown Melbourne.

Crown Melbourne defines VIP ‘high rollers’ as “gamblers from Australia or overseas, including but not limited to commission based players, who gamble large amounts of money with casinos, typically in VIP gaming areas …” (VCGLR, 2013, p. 33).

Commission-based players, a subset of all VIP players participate either through a junket or premium play. Under Victoria’s Casino Control Act 1991, only non-Victorian residents (domicile) can participate in commission- based arrangement. Players are normally required to pay specific up-front money to qualify for play. They are exempt from some aspects of the legislation such as different tax rates and smoking bans in VIP gaming areas. Crown can extend credit to these commission players who are not Australian residents (VCGLR, 2013).

Junket operators act as intermediaries between players and casinos. Junket operators recruit patrons through their agents who have their own extensive network of players. Receiving commissions from the casinos based on turnover of play, junket operators also provide other ‘value added’ services such as arrangements for credit to players, travel, accommodation, entertainment, food beverages, transport and accompanying players to the casinos (VCGLR, 2013).

Figure 8.8: Crown Melbourne Casino VIP player arrangements

Note: (a) Commission-based players are exempt from some aspects of the legislation including tax arrangements and smoking in VIP rooms Source: SACES illustrations from VCGLR (2013).

Under a premium play arrangement, casinos deal directly with the player who receives a commission at a value negotiated before their play. Premium play commissions are usually based on their gaming performance and may include either of the following combinations below.

 rebate and complimentary allowance based on turnover;  complimentary allowance based on turnover; and

 rebate, as a proportion of loss and complimentary allowance as a proportion on turnover. In summary, the supply of casino gambling in the Asia-Pacific has increased quite rapidly in the decade to 2014 with the prospect that Japan may liberalise its market. “Bricks and mortar” casinos are positioning to take advantage of the predicted growth in the mass tourism market, growing consumer spending and an expanding middle class in Asia.

New casino developments are styled as “entertainment, mixed-use, integrated resorts” which necessitates an effective response from the Australia casino industry. The proposed Brisbane Queen’s Wharf Casino is one example of a large scale, integrated resort precinct that will, inter alia, “lock into the mass tourism market”.

Australian casinos (relative to those in Asia) have a much higher ratio of EGMs (poker machines) to table games than is found in Asian casinos. In part this reflect cultural differences where many Asian communities prefer table games of skill (baccarat, poker).

VIP Program Play market segment is relatively high risk, but potentially lucrative with Crown Casino (Melbourne) and The Star (Sydney) the most active in this market. Competitiveness of Australian casinos is assisted by lower VIP tax rates.

VIP players (Australia and Oveseas) Commission-based players (non - Victorian residents only) (a) Junket arrangements through junket operators Premium play arrangement directly with casino

Credit only extended to non-Australian

residents