Ruling coalition sets tax at 30 percent, to allow 3 IRs

The ruling coalition Liberal Democratic Party and Komeito party agreed on Friday on a flat 30 percent tax rate and to a limitation setting the casino floor size at 3 percent of the resort, which was largely along the lines preferred by the pro-IR lawmakers. A further report on Saturday suggested that they had also agreed on authorizing a total of three local governments for hosting IRs.

Komeito had originally argued for an escalating tax rate that would start at 30 percent and then rise to 50 percent at a certain level of annual income. This notion has now been abandoned in favor of a 30 percent rate of taxation irrespective of the total amount of casino income.

The limitation of casino floor size to 3 percent of the IR’s area is also a victory for the more permissive LDP approach. While it may at first glance seem like a rather tight restriction, it appears that there will be a flexible interpretation of what constitutes the “total area” of each IR upon which the 3 percent limit will be determined. Also, there will no fixed maximum size of the casino floor—the earlier notion of a ceiling of 15,000 square meters has been abandoned.

The decision to host three IRs in the initial round is very much in line with the original concept, but will disappoint the more fervent IR advocates who had hoped for five or six. It also means that some local governments actively seeking licenses will be rejected.

The ruling coalition also agreed to a review of the legislation after seven years, not ten years as originally conceived. That probably means that a decision to license IRs beyond the original three could come around 2025.