Panama’s casino industry still impacted by 5.5 percent consumption tax

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While the government is looking to further develop the country’s tourist industry, Antonio Alfaro, president of trade body Asaja contends that the 5.5 percent consumption tax on the gambling industry combined with increased operating costs means that Panama’s casinos are unlikely to reap the benefits.

Antonio AlfaroWith a 5.4 percent rise in GDP in 2017, Panama seems to have regained its seat at the head of the Latin American regional growth table but the economic panorama for the country’s casino industry is looking less rosy.

According to figures from the national regulator, the Gaming Control Board (JCJ), the Panamanian gaming industry generated $86.7m in revenues in 2017. However this figure includes $10m paid by Codere to renew its concession to operate six casinos and the Hipódromo Presidente Remón horse racing track.

Leaving aside this extraordinary income, full year revenue for 2017 showed a 2.9 percent fall year on year.
Industry stakeholders contend that this decline is the result of the continued impact of the 5.5 percent consumption tax on the gambling industry, a measure introduced by the government in 2014 to help finance a rise in the state pension.

“This is another tax which is totally absurd and unfair to say the least and which is affecting players’ willingness to attend casinos,” contended Antonio Alfaro, president of Panamanian trade body Asaja.

“No one in their right mind would look favourably on a levy that does not apply to players’ winnings, but solely their intention to play.”

Panama aspires to become a gateway to Latin America for Chinese tourism, building on the government’s move to establish diplomatic ties with China in June last year.

“It is being shown that the Chinese market has an interest in discovering Panama,” said the country’s tourism minister, Gustavo Him. “Due to its strategic location, Panama automatically becomes a gateway to the entire region.

“With our new convention centres, modern hotels, historic attractions and convenient air service, Panama is poised to become the destination of choice for international meetings and conventions.”

As part of new cooperation agreements, PRC flag carrier, Air China, will reportedly begin operating direct flights to Panama twice a week, with a stopover in Houston in the US, starting in April.

Despite this, Alfano argues that Panama’s casino industry – situated in luxury hotels with over 300 rooms – is unlikely to reap the benefits of increased tourism given that the consumption tax continues to deter players.

“The greatest impact has been seen in table gaming participation, which is the preferred form of gambling amongst tourists,” he clarified.

Casinos in the country will also face an additional strain brought about by increased operating costs due to the 4.5 to 6.5 percent rise in the national minimum wage which came into effect this January.

As things stand, last year it was reported that operators had been forced to reduce their gaming tables by half, and had cut more than 2,000 jobs in order to keep their doors open.

“When operating costs increase, this burden falls directly on the operator who has no way of offsetting those increases,” Alfano continued.

In light of this, Asaja proposes that there should be a temporary halt on any additional casino openings, to allow the industry time to get back on its feet.

“We consider that it’s time to put a stop to this, to establish a moratorium on further casinos, and to not authorise any further licences for however long is prudent,” Alfano stated.
“In addition to this, the government should rescind the 5.5 percent tax – at least for table games – in order to simulate the tourist market and to permit the casino industry the chance to recover.”

In spite of the negative outlook for the industry, Alfano highlights the opportunity for potential synergies with the $193m Amador Convention Center which is due to come online in 2019.

Panama is investing heavily in increasing its MICE facilities with a 54,000 sq ft convention centre currently under construction in Chitre, and the 43,000 sq ft Verde Convention Center in Boquete in the planning phase.

“There is an opportunity here, the new Amador Convention Center will receive thousands of business travellers and this is the type of visitor that would really make a difference for casinos,” Alfano concluded.

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