Darren Keane shared his insights in a candid interview with Darren Keane. He is the CEO of Storm International and manages the Casino Shangri La Brand. Keane offers a critical perspective as the sector struggles with declining revenues and changing player demographics.
The Casino Industry: Current Status
Keane paints an alarming picture of the Georgian casino industry, stating that “unfortunately, the industry is in decline for first time in last 13 years.” This downturn, he says, is not only due to the COVID–19, but also to the ongoing economic pressures which impact tourism, a vital component of casino revenue.
The Importance Of Foreign Players
Georgia‘s casinos are dependent on foreign players. Keane says that “90-95%” of the casino revenue is generated by foreign players. In Tbilisi this figure is 92%, and in Batumi it’s 97%. He says that it’s clear that foreign players are essential to the success of Georgian casinos.
The impact of the 5% Cash Out Tax
The recent introduction of a 5 percent tax on cash-outs is one of the biggest challenges. Keane says that this tax will “ultimately destroy” the gaming industry in Georgia. He explains, “It is a cash-out, not a wins tax.” Keane argues that this tax could “ultimately destroy the gaming business in Georgia.” He elaborates, “It’s a cash-out tax, not a winnings tax.”
Competitiveness of the Region
Keane warns Georgia’s tax policy has put it in a competitive disadvantage. “Players may decide to visit other nearby countries where such taxes don’t exist,” he explains. He cites Northern Cyprus, Armenia, or Belarus as possible alternatives. This competitive gap may deter visitors and threaten Georgia’s gaming market position.
Observing Changes In Player Behavior
Keane has noticed a “decrease in foreign visitation” at both casino locations since the implementation of the Cash-out Tax. He stresses the broader economic impact, saying that “these foreigners also spend their money in hotels and restaurants, spas and shops.” The impact will not only be on the casinos, but also in the economy of Georgia. He mentions that even local Georgians travel to Yerevan to avoid the cash-out fee.
Potential Casino Closures: Economic Implications
Keane predicts, looking ahead, that casino closures may become a reality without intervention. He explains that the profit margins of all Tbilisi’s casinos have been greatly reduced, and that many establishments which were barely profitable now face losses. This could result in significant job losses and further strain the local economies. He warns that the government will have less money to pay for casino licenses, individual quarterly table and slots taxes and, of course, salary taxes.
The 5% tax is applied to the amount that a foreign player withdraws. If this tax is not removed, it will have serious consequences for Georgia’s gambling industry.
The link between casinos and hospitality
Keane emphasizes the interconnectedness between the casino and hospitality sector in Batumi. “As gaming tourism gradually decreases due to this tax more casinos will shut down. He says that this will also affect possible new casino and hotel openings. The decline in casino patronage may stifle the growth of related industries, further compounding the economic problems facing the region.
Engaging with Regulators
Keane stresses the importance of a constant dialogue with government officials regarding the implications of the Cash-out Tax. He notes that the government might not fully understand the gravity of the situation. “We have tried explaining the difference between winnings tax and cash-out tax, but without success,” he says. He calls for a rethink of current tax policies.
Proposed solutions for Industry Growth
Keane proposes major revisions to the tax structure in order to revive Georgia’s gambling market. Keane suggests aligning the GGR on land-based casino with the lower 5% tax rate applied to online gambling. He also reiterates that “the 5% cash-out fee should not be charged to any foreign players” to ensure Georgia’s competitiveness as a gaming destination.
The Long-Term Outlook
Keane warns that Georgia’s casino sector will suffer serious consequences if the 5% cash out tax is not removed. He says that if the tax structure for land-based casino does not change, Georgia will cease being a gaming destination in three years. He believes that casinos might need to absorb cash-out taxes from foreign players in order to keep them coming. However, he acknowledges that this is not a viable solution.
Call to Action
Keane concludes by sending a clear message to the government stakeholders. “This tax is driving away foreign players.” He gives the example of an Arab player who came with six family members and paid $100,000 for a $100 buy-in. After two days of playing, his family went shopping and ate out at restaurants while he was playing. He lost $30,000. He cashed out the rest of the $70,000 before his flight and was taxed 5% on cash outs, which came to $3500. He was furious because he had lost $30,000 on his trip and was forced to pay an additional $3500 cash out tax. He has not returned to Georgia, and now plays in Cyprus and Yerevan. Keane’s call for change is reinforced by this example, which highlights the possible consequences of the current tax structure. Georgia’s casino industry will be impacted by the strategic decisions it makes regarding taxation and engagement of players as it navigates through these challenges. Without proactive measures, Georgia risks losing its competitive position in the international gaming industry.
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