A year after some top junket operators’ bosses lost the authorities’ favor and the position of power they had gained over the years, junkets in Macau and their former employees are still adjusting to the “new normal” and the roles they have in a new market’s reality.
Until recently, some employees of so-called junkets, such as Suncity Group, believed they would work at these companies until they retired, as they had well-paid jobs and were happy with the working environment. Even the Covid-19 pandemic outbreak was unable to change these people’s belief that not only everything would get back to normal, but the sector would also continue to prosper in the years to come.
Little did they know that the much-awaited comeback of junket operators, such as Suncity, would not happen, especially after the arrest of one of the most powerful bosses in the sector, Alvin Chau, in late November 2021.
Mr. Chau’s arrest, however, has been only the beginning of the whopping subsequent collapse of the segment, which saw some of the industry’s leading figures fall from grace. All of this swept over the sector just like an avalanche, with junket operators, which are officially named “gaming promoters” still trying to cope with the massive shake-up in the sector and get used to their future roles in the industry, considering the enhanced supervision.
Gambling Sector Reality Rapidly Changing for Macau Junket Operators
According to figures provided by the Gaming Inspection and Coordination Bureau (DICJ), earlier in 2022, there were 46 licensed gaming promoters in the special administrative region of Macau. In comparison, the peak in the sector was reached in 2013, with more than 200 junkets, whose number got slowly reduced to 100 before the Covid-19 pandemic. A few sources close to the local gambling industry, however, revealed that only “a few” of them remain currently active, especially after the last-year arrests and the enforcement of the amended gambling law in the SAR earlier this year.
Under the newest version of the Macau gambling law, so-called gaming promoters (more commonly known as “junkets” or junket operators) are banned from operating any gaming facilities. They are also banned from establishing revenue-sharing agreements with local casino operators. The new rules were basically the ruin of VIP rooms that have long been managed and run by junket operators in Macau casinos.
According to some market experts, the implementation of the new rules has defined the role of gambling companies in Macau and what they can and cannot do in the special administrative region. The new gambling law could also prevent the lack of clear rules regarding the relationship between gaming promoters and casino patrons, given the joint liability of casino license holders over the activities of junket operators.
Under the revised gaming law of Macau, which was approved by the SAR’s Legislative Assembly in June, the satellite casino promoters are allowed to take on the form of “management companies”. Such businesses would not be allowed to ink revenue-sharing agreements with their respective concessionaire partners. However, local lawmakers decided to provide the companies with a three-year grace period for the change to a management-company deal. The grace period also applied to revenue sharing.
According to market analysts, the junket operators who remain active in Macau’s gambling market are now simply waiting to see what happens next, hoping to see a turnaround in their business volume soon. Some experts believe that many of these junkets might eventually quit the local gambling sector, in light of the tightening regulations and the potentially negative impact of the Covid-19 pandemic over the city of Macau, if further travel restrictions are imposed.
Macau Legislative Assembly Gives Final Approval to the Junket Bill
Recently, the Legislative Assembly had a piece of gambling legislation, known as “the junket bill” to consider. The piece of legislation, which was rolled out for a final vote in mid-December, is aimed at regulating the activities of gaming management companies and junket operators. The draft included a proposal that each junket operator will be allowed to work with one gambling company instead of partnering with multiple casino licensees. The capital requirement of such gaming promoters was also sought to be raised from MOP100,000 to MOP10 million.
On December 15th, the Legislative Assembly of Macau gave a second and final approval to a consolidating bill that seeks to regulate the licensing procedures and activities of so-called junkets, which have long been a special category of enterprise linked to so-called satellite casinos.
The piece of legislation, called Regime for Exploitation of Games of Chance in Casinos, had its first reading in April 2022 and has been subject to enhanced scrutiny and consideration by a special committee within the Legislative Assembly. After a number of revisions have been made to the draft, the special administrative region’s Government announced that the bill’s enactment would be pretty much aligned with the new generation of casino operating permits. As CasinoGamesPro previously reported, all six existing casino concessionaires in Macau received new 10-year licenses that are set to come into force on January 1st, 2023.
Under the provisions of the bill, the local Government has been provided with the authority to put limits to the scale of the local junket sector annually. Such a cap on the number of junkets will apply to any new application for a gaming promoter’s license after the new piece of legislation comes into force. Apart from that, individuals would no longer be able to apply for a junket license.
The Legislative Assembly committee had suggested that market forces should be left to deal with the scale of the local junket segment instead of imposing a cap on the operators. The Macau Government, however, said that it wanted to see some limits imposed in order to keep the integrity of the gambling sector and keep it healthy.
As mentioned above, all revenue-sharing agreements between casino concessionaires and junket operators were suspended.
The Government of Macau Expects Almost 77% Decline in Junket Commission Tax Revenue in 2023
After the recent approval of the new gambling bill, the Government of Macau has estimated that it will collect not more than MOP million in taxes on commissions that are paid to junkets by casino operators. The expected figure represents a 76.7% decline from the same tax that amounted to about MOP43 million in the fiscal year 2022.
The expected figures were unveiled in a report that the local Legislative Assembly issued as part of the budget proposal for the 2023 fiscal year. The SAR’s Government also provided estimates for the casino gross gaming revenue (GGR) in the city, saying it expects a GGR of about MOP130 billion.
As revealed by the special administrative region’s Government, the expected reduction in taxes on junket commissions was mainly because of the negative impact that the coronavirus pandemic outbreak had on the sector, along with the newest capital flows control policy of mainland China. The ongoing adjustments for the VIP gaming sector in the world’s largest gambling hub were also cited as one of the key reasons for the tax volume reduction.
So-called junket operators, which are officially categorized as gaming promoters, are licensed to promote high-roller gambling across Macau casinos. Their services involve the arrangement of players’ gambling credit, the organization of player accommodation, as well as the collection of losses generated by VIP casino patrons.
The commissions paid by gambling companies to junket operators saw a 5% withholding tax levied. However, such a withholding tax is not imposed on the gross value. In Macau, junkets are offered certain incentives – usually a commission on rolling chip turnover (which is set at 1.25%) or a share of the revenue – in return for their efforts to bring new casino customers.