Genting Malaysia has been granted an application for leave by the High Court to commence a judicial review into a decision by the Ministry of Finance (MOF) to amend the terms of tax incentives granted to the casino operator.
The company, currently in the midst of a multi-billion dollar redevelopment of Malaysian IR Resorts World Genting known as the Genting Integrated Tourism Plan (GITP), was granted tax incentives by the MOF for its GITP in December 2014. Under the agreement, Genting Malaysia would qualify for income tax exemption equal to 100% of its qualifying CAPEX for a period of 10 years.
However, in December 2017 – around the same time it first announced plans to review the fees and taxes imposed on Genting Malaysia – the MOF amended that agreement to significantly prolong the utilization period of the tax allowances.
Having had an initial appeal over that amendment turned down by the MOF, Genting Malaysia revealed on Thursday that “upon consultation with its solicitors and after due deliberation” it had proceeded to file an application for judicial review of the MOF Decision with the Kuala Lumpur High Court. That application has now been granted.
The result of the judicial review promises significant consequences for the casino operator given the announcement by Malaysian Finance Minister Lim Guan Eng in November that the government would increase Genting Malaysia’s annual casino license fee from MYR120 million (US$28.8 million) to MYR150 million (US$36 million) and the tax on gross gaming income from 25% to 35%.
The company’s stock price recorded its highest ever single day fall when the shock 10% hike was revealed, with Nomura analysts estimating at the time an “MYR600 million to MYR700 million (US$144 million to US$168 million) impact on Genting Malaysia EBITDA and net income for fiscal years 2019 and 2020, which would offset a big chunk of the earnings growth expected from Genting’s substantial capital expenditure into new capacity over the past five years.”
The brokerage was highly critical of the size of the hike, adding that the increases “diminish the investment appeal of the gaming sector.”
RelatedPosts
