How two-tier tax proposal broke deadlock in integrated resort talks

Singapore's growing and diversified economy put it in a strong position while negotiating with the integrated resorts (IRs). Even so, it required a bit of creativity to push the talks to their conclusion.

Trade and Industry Minister Chan Chun Sing made this point yesterday as he shared insights on the talks with Resorts World Sentosa (RWS) and Marina Bay Sands (MBS), which have committed to investing $9 billion between them to build new offerings, while seeing the exclusivity period for their casinos extended until the end of 2030.

He also spoke of how a two-tiered casino tax system came to be introduced and played a crucial part in smoothing the talks.

Mr Chan said the Republic's growing and diversified economy helped to strengthen its position during negotiations. "That is very important. That gives us the latitude to negotiate.

"Imagine if our economy had not been growing... or if we had been in a recession, then it would have significantly weakened our bargaining position."

In Singapore's case, its diversification gave it strength. "The IRs cannot be the centrepiece of the economy," said Mr Chan. "(They) must be one of many pieces."

The diverse economy ensured that Singapore was "never held ransom by one particular sector or overly dependent on one particular sector", he added.

 
 
 
 

Singapore went into the talks with clear objectives - to grow jobs and the economy and to contain any social ills arising from gaming operations.

Negotiations took about two years, and there were times when creativity was necessary to break any deadlock.

One example was the new two-tiered casino tax system, Mr Chan said. Under the new system that will start in March 2022, the first $2.4 billion of gross gaming revenue from premium gaming will be taxed at 8 per cent and anything above that, at 12 per cent.

Similarly, the first $3.1 billion from mass gaming will be taxed at 18 per cent, while anything over that will be taxed at 22 per cent.

This came about because the IRs had said their gaming revenue would grow at a low rate, but the Government felt that the growth would be higher. The tiered system was then proposed, with officials telling the IRs that if they did not exceed their projected threshold, they did not have to worry; but if their revenues were higher, they would be taxed more. This pushed the discussions along.

Mr Chan noted that the negotiations were made more complicated because the Government was negotiating with each operator separately, but had to ensure that the terms were equitable.

As for the increased casino levies, he clarified that these levies did not go to the Ministry of Finance but to the Tote Board, which uses them for charitable causes.

He added: "IRs in Singapore are quite different from the IRs elsewhere as their non-gaming components are more sustainable."

An RWS spokesman said hotels and attractions have been strong-performing businesses.

For example, S.E.A. Aquarium is a popular attraction that nears maximum capacity at times. The plan is to expand it to three times the space.

It will also have new features such as holograms of the deep sea, a discovery pool with live creatures and marine conservation education exhibits.

MBS president and chief executive George Tanasijevich said: "The primary elements of our expansion aim to relieve both MBS and market constraints."

A version of this article appeared in the print edition of The Straits Times on April 06, 2019, with the headline 'How two-tier tax proposal broke deadlock in IR talks'. Print Edition | Subscribe