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Japan No Longer Wants to Tax the Winnings of Foreign Players?

Article by : Helen Dec 16, 2020

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At the beginning of December, the chief of the ruling Liberal Democratic Party went on record talking about backtracking on the government’s plans to tax the winnings of foreign players started coming out.

Until now, the government was planning to tax the winnings obtained on the integrated resorts’ ground the same way as the ones from horse race betting. However, it may be too soon to celebrate: the proposal to cancel taxes on foreigners’ casino winnings will first be added to the tax reform package for 2021, which is yet to be reviewed and passed. So, it’s better to wait until the ink is dry.

It would be meaningless if no one comes to the integrated resorts after building them.

The sweet deal will work only for foreigners: the Japanese nationals will have to declare their winnings, which will then be taxed. The casino industry in Japan is still in its early days of development: while sports betting, lottery, and toto (football pools) have been traditionally legal for a long time, the Japanese government allowed casinos to operate as a part of integrated resorts only in 2018. That year, the parliament passed the Integrated Resort Promotion Act, under which integrated resorts were defined as “specified complex tourist facilities” integrating “casino, convention and conference, recreation, exhibition, accommodation, and other facilities.”

The government expects the (relatively recent) laws to boost Japan’s economy. According to Sanford Bernstein’s study published in 2019, the country’s casino market was estimated to be worth $8 billion a year. However, it is unclear how much of that potential the Japanese government would be able to realize now. Even though the industry was given the green light, there are still no integrated resorts with casinos operating in Japan. As the industry is only in its early days, so are the laws and regulating bodies. For instance, the Casino Management Committee was established only at the beginning of 2020.

The government is planning to give only three licenses to develop and run integrated resorts, with the interested cities also having to bid to win the chance to host one. As of now, the potential bidders include Yokohama (Suga’s constituency), the city of Osaka, Osaka Prefecture, Wakayama Prefecture, and Nagasaki Prefecture. The bidding was scheduled to be opened in January next year, but the coronavirus pandemic got in the way – the government put the start of the competition off until October 2021. The bidding process will last seven months. The subsequent delay of the Tokyo Olympics and Paralympics, which was supposed to attract millions of foreigners to Japan, and the restrictions to be put on the attendance due to coronavirus also curb the industry’s potential.

As for the companies planning to open their integrated resorts in Japan, the competition seems to be dying out, figuratively speaking. Las Vegas Sands gave up on the idea in May this year (without providing an explanation as to why), and so did Caesars Entertainment Corp and Wynn Resorts Ltd before that.

Despite the industry’s relatively short lifespan, there were already some scandals revolving around it. Earlier this year, a House of Representative member was charged with bribery for receiving ¥7.6 million from a Chinese casino operator who wanted to obtain a license for an integrated resort in Japan. All in all, the start of the new industry doesn’t seem to be as smooth as one could hope. We’ll be able to tell more definitively how successful the Japanese government is at launching it when the results of the competition for licenses come in.

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