After debating the costs and benefits of legalize gambling in the integrated resorts for several years, the Japanese House of Representatives passed the Integrated Resorts (IR) Implementation Bill on June 19, 2018 and the parliament finally passed the Bill in late July 2018. It is predicted that the first casino licenses to be issued in 2020 and actual operation of casino after five years.
The objectives of this paper are to develop an optimal taxation model that can help the Japanese government, and other countries that are interested in offering integrated resorts to attract tourist, to set up a tax policy and other related regulations to maximize the benefit from IR. Unlike other previous studies that assume that the gaming industry and IR is competitive, we will use an oligopolistic setting to capture the “limited competition” implied by the speculations that the Japanese government will issue three licenses only to operators. In Macau, similar number of licenses were issued, but the three license holders later on were allowed to “split” their licenses into two and therefore currently there are six casino operators in Macau. In Singapore, only two licenses was granted. In Las Vegas, a more liberal approach similar to the competitive market philosophy was employed and therefore more than 10 licenses are provided. Our oligopoly model is consistent with the small number of casino firms and their impact on tax revenue will be examined.
Implications
Our model can be used to examine the impact of local and foreign tourist on optimal taxation. We will show that the strategy proposed by the IR executive may be sub-optimal and in conflict with the government objective if the local tourists are most day trippers according to the gaming literature. Attracting tourists from other countries, especially those near China, may be desirable in term of international trade, because tourism is in fact an exporting of service.
Author: Prof. Jacky Yuk-chow So Dean and BNU Chair Professor in Finance Faculty of Business Administration | www.umac.mo/fba | Co-Director of Asia Pacific Academy of Economics and Management | www.umac.mo/apaem | Room 4047a University of Macau, E22 Avenida da Universidade, Taipa, Macau, SAR, China Tel.: 853 8822 4724 | Fax: 853 8822 2374 | Email: [email protected]
