Delivered in Parliament on 10 January 2022
Mr Speaker, the Gambling Duties Act 2022 will be a new Act in our legislation, although as I understand from the bill, much of the content is not new per se, and the bill seeks largely to consolidate the law on levy and collection of duties on lawful betting and lotteries, make related amendments to the Casino Control Act regarding casino taxes and casino licenses, repeal the Betting and Sweepstake Duties Act and make consequential amendments to certain other Acts.
My speech today will focus largely on the related amendments to the Casino Control Act, which I believe to be the most significant change within this bill, but I will first speak broadly about the issue of problem gambling as well as gambling duties in Singapore.
Speak of gambling and some of the images that appear in my mind are the ads run by the National Council on Problem Gambling or NCPG, featuring the 2012 TV Commercial, where a man was asking his daughter for her piggy bank and saying, “one more try, I promise I will give it all back”. Or the other ad featuring Andy, whose father bet all his savings on Germany.
While these ads were the subject of numerous light hearted parodies and spoofs, especially after Germany won the World Cup in 2014, the issue of problem gambling and the social ills associated with it is a serious one that deserves our utmost priority whenever the topic of gambling is discussed.
To this end, while there may be visible economic benefits from the investment and expansion of the two new Integrated Resorts, we should always bear in mind the less visible social costs and risks of negative externalities associated with an expanded gambling scene in Singapore.
I recognise that casino entry levies have been raised in 2019, and this has resulted in visits made by Singapore Citizens and PRs falling to 2.7% of local the adult population in FY2019 from 4.0% in FY2018. As a result of Covid however, I wonder if and how much did visitor-ship increase as a result of border restrictions? Further, to those at higher risk of problem gambling, the higher entry levy could instead spur them to raise their bets to cover the additional costs of entry.
So I do hope that the Government will continue to tighten the safeguards not just against casino visitor-ship, but to other forms of gambling as well, particularly online gambling. I have been receiving weekly SMS-es and WhatsApp messages inviting me to online casinos for example, and I’m sure a number of members have as well. And in December last month, the news about three brothers operating an illegal gambling syndicate that collected a weekly revenue of at least S$1 million suggests that urgent action need to be taken to address the shadow gambling scene in Singapore.
Moving on to the legalised aspects of things, gambling or betting taxes, alongside tobacco and liquor excise duties plays a not insignificant role in the Government’s operating revenues over the past years.
In absolute terms, I note that betting taxes for FY19, which is prior to the onset of COVID-19, account for S$2.6 billion in government revenues. Even with the onset of COVID-19, with suspension of betting activity during the Circuit Breaker period and the sharp fall in tourist arrivals affecting casino visitor-ship, the estimated FY20 betting tax revenue is at S$1.8 billion. This is larger than the contribution from the tobacco excise duties of S$1.2 billion in FY19 and S$1.4 billion in FY20.
In the budget statement last year, the Government shared that betting taxes are estimated to increase by a significant 30.4% to $2.4 billion in FY21. Yet at the same time, revenues from betting taxes have been relatively rangebound over the past decade, with contributions from betting taxes not too different in FY10 at S$2.3 billion. In fact I observed that the relative share of betting taxes to the Government’s operating revenues have broadly been declining over the last twenty years, from close to 6% of revenues in FY02 to 3% of revenues in FY21.
Given the social objective of avoiding excessive consumption of areas such as betting, tobacco and liquor, I strongly believe that there is room for betting taxes to be raised.
I recognise of course that part of the consequential amendments to this bill is the raising of casino taxes, a point which I will revisit shortly in my speech, but I note that the last time betting duty rates on lotteries was raised was more than seven years ago in July 2014, from 25% to 30% of gross bets. Is or would the Government consider raising betting duty rates and other associated gambling duty rates in the near term in this regard?
I will next touch on amendments to the Casino Control Act, the most notable of which in my view is the raising of casino tax rates, which are slated to take effect from 1 March 2022. I am supportive of the raising of casino tax rates, and my first question is, what is the Government’s expectations of the additional revenues from higher casino taxes not just in the next financial year, but over the next decade?
I ask this because back when the two Integrated Resorts (IRs) were awarded, the Government had committed not to raise the casino tax for at least 15 years. As we are coming to the end of the moratorium in February 2022, the Government will also be providing a moratorium on the new casino tax rates, this time for a 10-year period. As such, I believe the Government would presumably have conducted a comprehensive assessment as to the effect of the higher casino tax rates, as this rate cannot be changed in the next decade.
Therefore, a second related question is whether the Government can share its key considerations and deliberations before finally arriving at the current tiered casino tax rates of 8% and 12% of GGR for premium gaming and 18% and 22% for mass gaming respectively.
The recency of COVID-19 and the significant curtailment of visitor arrivals to Singapore could lead some quarters to question the sustainability of the higher casino tax rates; in the sense that, whether or not the tax rate increase could place an onerous burden on the two casino operators, amid ongoing uncertainties given the effects of COVID-19.
But if we take a step back, I would argue that higher casino tax rates are not only long due, but could have room to grow in future.
I am reminded of the buzz that surrounded the opening of the two IRs back in 2010, which have no doubt enhanced Singapore’s position as a tourism destination. The two operators have done well for themselves, surprising many back in the day, given how both IRs have achieved success very early on in their operations.
According to on an article from My Paper in June 2010, the late Minister Mentor Lee Kuan Yew shared that Marina Bay Sands will probably take three to seven years to reach a capacity that can help spur Singapore’s tourism and convention industries. The late Mr Sheldon Adelson, former chairman of Las Vegas Sands however said that MM Lee was being “a little too pessimistic”, and the property will be up and running at full speed by the next year. Mr Adelson was proven right in the end and I believe even surpassed his own expectations, where he shared in a statement in 2011 that MBS had generated over US$1 billion dollars of adjusted property EBITDA in just its first twelve months of operation, which is a record not only for any property in the history of Sands, but a record for any property in the history of the industry.
Fast forward to today, I estimate that both IRs have over the period from 2010 to 2020 generated a cumulative EBITDA or Earnings Before Interest Tax Depreciation and Amortisation of more than S$30 billion dollars – more than double the S$15 billion that they have invested in 2006, and counting. Both properties continue to generate strong earnings and cash flow today, which will in all likelihood recover alongside Singapore’s tourism industry.
Macau, the largest gaming market globally imposes a special gaming tax of 35% of GGR, amid other fixed and variable premiums payable, while also requiring operators to contribute a further percentage of GGR to utilities designated by the Macau government. In this context, could there have been room for our casino tax rates to be higher?
This considering also the strong profitability of the two IRs, where the recent impact from COVID-19 notwithstanding, both IRs have historically generated 40-50% EBITDA margins since their opening. As a reference point using Sands, given that it has operations across Macau, Singapore and Las Vegas, I estimate that in pre-Covid FY2019, Sands enjoyed the highest EBITDA margins in Singapore at 54%, compared to 36% in Macau and 26% in the US.
The third point I would like to raise in relation to the Casino Control Act is related to a Parliamentary Question I raised in November, where I had asked the Minister for Trade and Industry given COVID-19 disruptions to the hospitality industry, whether there are any changes to the timeline, investment commitment and nature of the S$9 billion combined investment commitment by the two IRs.
Back in 2019, the Government noted that in view of the substantial investment of S$9 billion dollars by the two IRs, and to provide business certainty, the Government has agreed to extend the exclusivity period for the two casinos to end-2030, with no other casinos to be introduced during this period.
Minister Gan shared in a reply to my PQ that the IRs remain committed to delivering on their expansion plans, but both have indicated that there will be potential delays in the completion of their projects.
That much is clear, given Sands has shared that they may not be able to meet the target 2025 completion deadline they have previously indicated, even though completion was only required by April 2027, while Genting Singapore has announced in early 2021 that it will delay development of its RWS2.0 expansion project until 2022. While COVID-19 has indeed created significant disruptions and delays for the construction industry, how much leeway is the Government prepared to give the two IRs, are there any revisions to the Government’s required completion dates and what sort of timeline would be deemed reasonable?
I am sure for Singaporeans looking forward to the new attractions and the IRs themselves alike, regulatory clarity and certainty on key deadlines would be much appreciated, not least because a flat tax rate will be applied if the IRs fail to meet its investment commitments.
Last but not least, with casino taxes set to rise, how much of the increased revenues from our raised casino taxes would be diverted towards efforts to mitigate the negative social effects of the continued existence of gambling establishments in the country? I would also humbly suggest that a fixed percentage (or absolute amount) of gambling revenues could be dedicated toward gambling safeguards and rehabilitation of problem gamblers.
I also note that in the 2019 press statement, it was revealed that the IRs will conduct a joint study with MSF to understand upstream preventive technologies and options available to promote responsible gambling among all gamblers. What has been the findings of this study, what measures will be introduced following the study and whether the report will be shared with the public?
All in all, I do support the rise in casino tax rates, though I believe there is still upside room to go when it comes to raising betting taxes, especially given the social objective of avoiding its excessive consumption, and I hope the Government will consider the points raised in my speech. Thank you.