Transition of tax will be largely neutral on gaming industry
KUALA LUMPUR: The transition from goods and services tax (GST) to sales and service tax (SST) will be largely neutral on earnings of the gaming industry, analysts believe.
The Royal Malaysian Customs Department recently announced that gaming services including casino, game of chance, sweepstakes, gaming machines, lottery and betting will be subject to a six per cent service tax charged on collection, based on formula.
The research arm of Maybank Investment Bank Bhd (Maybank IB Research) recalled that gaming companies absorbed the six per cent GST from April 1, 2015 until it was zero-rated on June 1, 2018.
“Crucially, the announcementstates that the six per cent SST will be levied based on a formula rather than levied directly on sales without any deductions.
“The latter, we opine would be overly onerous on Genting Malaysia Bhd (Genting Malaysia) and the number forecast operators (NFOs),” Maybank IB Research said.
While further details will be unveiled in the coming weeks, AllianceDBS Research Sdn Bhd (AllianceDBS Research) believed that the authorities will adopt a similar formula for GST computation to calculate service tax liabilities for the gaming operators
“Should the government adopt a similar formula, service tax to be imposed on Genting Malaysia would be (gross gaming revenue – casino tax) X 6/106; for the NFOs, the service tax would be (sales – gaming tax – pool betting duty – expected prize payout) X 6/106,” the research house said.
Maybank IB Research also noted that gaming tax is levied at eight per cent of sales while pool betting duty is levied at eight per cent of sales less gaming tax.
“Effectively, the SST merely replaces the GST.”
While gaming companies may benefit from the ‘tax holiday’ from June 1 to August 31, 2018, the research arm thus estimated that the earnings accretion is immaterial at or less than five per cent and for current year 2018 (CY18) only.
“As a whole, other than a temporary relief arising from the ‘zerorisation’ of GST between June 1 to August 31 (resulting in less than three per cent earnings accretion for the gaming operators based on our calculation), we believe that the transition from GST to service tax will be largely neutral on earnings of the gaming industry,” AllianceDBS Research said.