South Africa’s casinos may see their profits hit by proposed changes to the country’s income tax laws, PricewaterhouseCoopers has warned.
In February, Finance Minister Pravin Gordhan announced that a tax based on gross gambling revenue from casinos would be introduced next year. This follows the 2011 budget proposal on gambling, when the minister suggested that all gambling winnings above R25,000 ($3,050) would be subject to a 15 per cent tax.
Now, Nikki Forster, PwC South African hospitality and gaming sector leader, is warning that the hotel industry may face expenses in complying with a proposed additional one per cent gaming tax with effect from April 1, 2013.
“Undoubtedly it is a relief for the industry that the government has scrapped plans to introduce a withholding tax as this would have had a negative effect on the sector, particularly high-stake gamblers,” Forster said, adding that this additional levy will eat into the profit margins of casinos.
The industry already has a levy in place on gaming on top of VAT and income tax.
“This is just another one per cent above that, meaning that profit margins will be squeezed significantly at casinos, particularly at smaller casinos. To add another one per cent is extremely punitive for the industry. The fiscus is getting a big enough share of the pie already from the industry.”
The gambling industry’s gross revenue for 2011 increased by five per cent to R17.14bn from the previous year’s R16.268bn, according to statistics contained in the Casino Association of South Africa’s eighth annual survey of casino entertainment. During the same year, the industry contributed R4.5bn in taxes to central government.
South Africa’s gambling act permits up to 40 licensed casinos, with 37 presently in operation.
