South Korea Casino Industry Pushes Back on Levy Hike, Renewal Plan

The Korea Casino Association has requested the government of South Korea’s Ministry of Culture, Sports, and Tourism to revise its plan to introduce changes to the existing gambling regulations, saying that an increase in the tourist tax and a license renewal process would make it harder for the business sector to become more competitive and invest money into operations.

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Levy Hike Draws Opposition

According to a press release issued by the association on Tuesday, the association is opposed to two proposed changes being considered by the government at the moment, increase in the maximum levy on the Tourism Promotion and Development Fund from 10% to 15% of gross gaming revenue, and the change of the permanent licensing system to a 5-year permit system.

The higher levy rate is unfair to the operators since it is calculated based on gross gaming revenue and not profit. It said about half of South Korea’s 18 casino operators had recorded operating losses each year over the past decade, while casinos also face individual consumption tax, corporate tax, and local taxes.

The association said that the proposed increase in the levy may negatively affect the ability of the operators to survive financially since they are just recovering from the effects of COVID-19. The association further stated that on July 15, the stock price of casino companies went down, even though the Kospi was going up.

License Renewal Concerns

The association also objected to the proposed introduction of 5-year license renewals. It said casino licenses have had no expiry date since amendments to the Tourism Promotion Act in 1994, provided operators complied with regulatory requirements such as payment of the tourism fund contribution and meeting operational standards.

According to the group, bringing in 5-year renewals after 3 decades would undermine the expectations of existing operators. It said the change could create uncertainty for long-term investment projects worth billions of won and could also lead to job losses.

The trade body added that the current law already gives the government power to suspend operations or revoke licenses for serious regulatory breaches. On that basis, it said the proposed renewal framework would simply duplicate existing oversight. It also said South Korea’s casino market differs from most international jurisdictions because, apart from Kangwon Land Inc, casinos are restricted to foreign patrons, making any additional regulatory burden more difficult to absorb.

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Regional Competition

The association said tighter regulation would weaken South Korea’s position ahead of the opening of the MGM Osaka casino resort in Japan. It warned that high-value foreign VIP customers could shift to competing destinations elsewhere in Asia if the country’s regulatory environment becomes less attractive.

The Osaka casino project is a joint development between the international company MGM Resorts International and its local partners and is expected to be operational by late 2030. The association believes that timing is very important in light of rising regional competition amid reform discussions in South Korea.

Levy Scale Dispute

In a separate position paper released on Wednesday, the association disputed suggestions that the tourism fund contribution had remained unchanged for 30 years. It said the contribution follows a progressive scale, ranging from 1% to 10% of revenue depending on turnover, and that casino industry contributions since 1994 have totaled KRW5.23 trillion, or US$3.53 billion.

The group also said casino operators have been subject to an individual consumption tax since 2008, ranging from 2% to 4% of revenue and rising to 5.2% when an additional education tax is included. It said claims that the industry’s financial burden has stayed unchanged over the past 30 years were inaccurate.

The association estimated that lifting the maximum tourism fund contribution to 15% would increase annual payments by about KRW76.3 billion for 3 major mainland casino operators, and by about KRW101.9 billion if a casino operator in Jeju were included.

Industry Calls For Reversal

The association said other markets in Asia are opening or easing measures to support gaming industry growth, while South Korea continues to move toward tighter regulation. A representative cited in the statement said the government should withdraw both the licence renewal proposal and the higher contribution rate, and instead adopt policies that support and promote the casino sector so it can keep contributing to tourism and economic development.

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Source: GGR Asia