Cambodia-based casino operator NagaCorp Ltd may be forced to pay additional non-gaming taxes totalling $16.6m following a government audit of its Phnom Penh hotel and casino resort complex.
NagaCorp Ltd’s 2014 and 2015 financial records were audited by authorities following allegations of ‘discrepancies’ in its financial reporting. Following this review auditors working on behalf of the Cambodian government levied a bill of $16.6m in back taxes on non-gaming revenue, which includes revenue from the complex’s hotel and restaurants.
The measure was announced by the Ministry of Economy and Finance (MEF) who later revealed that the final amount of the payment is to be negotiated and could increase beyond $16m.
The news comes just days after its parent company, NagaCorp revealed record net profits of $150.6m for the first half of 2017, representing a 20.3% year-on-year increase on 2016’s net profit figures.
However, its high profits seem to have contributed to NagaCorp’s emergence on the Cambodian finance ministries radar, with Deputy Director-General of the Ministry’s Finance Industry Department Ros Phirun telling The Phnom Penh newspaper: “From now on and for every year we will make NagaWorld pay at least $16m on their non-gaming operations.”
Phirun added:”There is no longer any excuse for a company that is this profitable.”
This is not the first time that NagaCorp has opened its books to Cambodian authorities, auditors previously found that the company had claimed an exemption on non-gaming revenue taxes, citing a 2006 agreement that granted it a seven-year grace period to complete construction of its flagship 700-room hotel and casino in Phnom Penh. The term of the agreement, however, ended in 2013.
NagaCorp has enjoyed something of a special status in the Cambodian economy, benefiting from both a special tax agreement with the Cambodian government, signed over twenty years ago and a relatively undisturbed 41-year gambling monopoly over a 200-kilometre area of Phnom Penh, both of which have contributed to the rise of the company over the years.
Under the terms of this special agreement the company has been allowed to pay a single gaming and non-gaming activities tax on a monthly basis, instead of being subject to the 20% corporate profit tax imposed on other businesses operating in the country.
Its parent company, NagaWorld pays no taxes in Hong Kong where it is listed or in Cayman Islands where it is registered, instead paying an effective tax rate in Cambodia of less than 2%. However, last year’s audit by authorities resulted in an increase of the tax rate to 6.7 percent in 2016, with a total $22 million paid to the MEF on $327.8m gross profit.
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