Marianas Variety

Last updateWed, 17 Oct 2018 12am







    Tuesday, October 16, 2018-12:28:59A.M.






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Variations: Government policy is not a magic wand

I’VE no doubt that the proposal to impose an additional tax on the Saipan casino is very popular.  And I’m sure proponents have enough time to collect the necessary number of signatures and put the initiative on the Nov. 2018 ballot.

Many believe that an additional tax will result in more government revenue, but I’m not so sure about that. Many popular and well-meaning local laws and initiatives have failed to do what they’re supposed to do. (See anti-littering law, juvenile curfew law, “zero tolerance” drug laws, etc.) And when it comes to taxes, some economists say higher rates could discourage growth and result in less revenue. They also point out that “tax rates and tax revenues are two different things — [they] can move in either the same direction or in opposite directions, depending on how the economy responds.”

Perhaps the casino tax proponents should spell out what their goal is. Stick it to Imperial Pacific International? Or generate more revenue for the government’s most pressing obligations? The former may not result in the latter.

Here’s another thing to clarify. How much is the actual taxable amount? Some say that IPI recorded “close to $3 billion in bets.” Let’s assume that’s true. But did all those bets lose to the house?

There’s a website about “understanding casino earnings,” and it explains the meaning of “rolling chips” and other casino industry jargon:

“When you walk up to a blackjack table in Las Vegas and you hand the dealer a $100 bill for chips, they put that money into a drop box. This is what is known as the ‘drop,’ ‘table game drop,’ or sometimes ‘non-rolling chip drop.’ ” For example, the website added, Wynn Macau reported $686.1 million in table drop but its table game revenue was $211.3 million. “The numbers say you’ll only walk out with about 70 percent of what you put down at a table.”

My point is that “close to $3 billion in bets” may not mean “close to $3 billion in taxable revenue.” (See

Also available online is IPI’s latest financial statement. ( For the six months that ended on June 30, the casino reported gross revenue amounting to 7.3 million Hong Kong dollars or over 930,000 U.S. dollars. IPI stated that for the same period, its profit before tax amounted to over 1 million Hong Kong dollars or over 130,000 U.S. dollars. IPI said its “profit for the period attributable to owners of the company” was over 900,000 Hong Kong dollars or about 116,000 U.S. dollars.
Perhaps the casino tax proponents should consult a U.S. certified accountant to look into these and other numbers. Some voters may be expecting “$300 million in additional revenue” if the proposed 10 percent tax is imposed on the casino.

Here’s another thing to consider: IPI’s response to the proposed tax which would increase its cost of doing business here. As an economist once said, people do not simply stand still to be sheared like sheep. To pay for the additional cost, will IPI reduce the number of its workers and/or their pay? How will this affect the casino’s local employees (CNMI voters)? And what prevents the administration and the Legislature from enacting a new law to “offset” the 10 percent tax?

I also don’t think we can compare Saipan with Macau which, among other things, recorded over 30 million tourists in 2016. (At the local tourism industry’s peak in 1997, the NMI numbers totaled over 700,000.) A commercial building owner in, say, Papago (assuming the building is allowed by the zoning law) can’t possibly charge a tenant the same rate collected by a building owner in downtown Garapan. Saipan’s casino is still a baby; Macau is “the gambling capital of the world.”

But then again, imposing an additional tax on the Saipan casino is up to the local voters. It’s their call.

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