A brokerage said on Tuesday it had been “caught… by surprise” concerning the Macau government’s proposal that gaming concessionaires should in the future each face a minimum annual target for casino gross gaming revenue (GGR), and still pay tax proportionate to any shortfall in recorded GGR.

The Macau government currently charges a direct tax of 35 percent on casino GGR. According to the draft bill, the tax regime for the industry will not change.

The provision on GGR annual minimums was included in the draft bill to create a fresh regulatory framework for the industry, and which was tabled on Tuesday on the website of the city’s Legislative Assembly, which will be responsible for reviewing the bill.

The bill states the city’s incumbent chief executive would set a minimum amount of casino GGR that each table or machine should generate annually. The GGR target will then be calculated based on the maximum number of gaming tables and gaming machines that each concessionaire is authorised to operate in any given year.

Under the bill, casino operators would have to return tables and gaming machines to the government, if that inventory did not generate a certain minimum GGR for two years running.

But JP Morgan Securities (Asia Pacific Ltd) said regarding operators’ annual GGR targets, which would be tied respectively to an operator’s average table and gaming machine performance: “We don’t think the target amount will be too onerous.”

The institution’s analysts DS Kim, Amanda Cheng, and Livy Lyu said this was because the Macau government’s annual forecasts on market-wide GGR, have “almost always been on the conservative side, over the past decade.”

They added: “Too much burden would push operators to return tables to the government, in turn weighing on local employment,” as only Macau ID holders are allowed under current arrangements to work as casino dealers.

The JP Morgan team further observed: “The provision is probably… to improve overall efficiency of table utilisation, as most properties were meaningfully underutilised, even pre-Covid.”

Hong Kong-based business-risk consultancy Steve Vickers and Associates said in a Wednesday update regarding Macau’s draft gaming bill, that the main risk to casino operators was “not regulatory”, but “nakedly political”.

The memo added, referring to another provision of the draft bill: “The primary factor which the Chinese and Macau authorities consider when evaluating concession renewals and new regulations is clearly the national security criteria and whether, for example, capital flight can be contained,” especially when linked to the issue of any casino operators with United States-based parent companies that might be “seeking to repatriate dividends”.

The bill states that the Macau government has the right to terminate the concessionaire’s contract for reasons including threats to national security, public interest, or breaching of its contractual obligations.

A further requirement in the draft bill is that Macau gaming concessionaires will be subject to a review every three years by the city’s casino regulator, the Gaming Inspection and Coordination Bureau.

The purpose would be to examine the operators’ “contractual compliance in general”, states the document.

Macau’s six existing licences are due to expire in June. The Macau government has said there needs to be a new regulatory framework in place, before a fresh public tender can occur. In the next round of licensing, up to six permits will be allowed, of up to 10 years in duration, although the government has said an extension of up to 3 years might be permitted under certain circumstances.