This article first appeared in The Edge Financial Daily, on March 16, 2016.

KUALA LUMPUR: Following the recent series of sin tax hikes, Hong Leong Investment Bank (HLIB) Research has brought up the possibility that gaming tax may be next on the card for a review.

The last time there was a raise in gaming tax for casinos was 18 years ago, in 1998, and six years ago, in 2010, for number forecast operators (NFOs), said HLIB Research analyst Sia Ket Ee in a note yesterday.

While the absence of gaming tax revision during the Budget 2016 recalibration earlier in January was a relief after absorbing the goods and services tax last year, he noted that duty/tax revisions in recent years for the sin sectors had been mostly done outside the tabling of the national budget.

“With the recent excise duty hike for alcoholic beverages by some 10% on March 1 and circa 40% for cigarettes on Nov 15, we cannot rule out the possibility of a review in gaming tax up next,” he said.

Gaming tax, he added, contributes around RM2.8 billion or 1.6% of the government’s revenue per annum.

But on a more positive note, he said the country’s fiscal position now is in better shape after the budget recalibration in January, and the potential windfall revenue from its spectrum sale, rehiring programme of illegal workers and et cetera.

“Coupled with the recent rally in crude oil prices, a review in gaming tax may not be imminent,” he said.

Still, if indeed a gaming tax hike is in the works, Sia estimated that for every 1% hike in gaming tax, casino operators like Genting Malaysia Bhd’s bottom line for financial year 2016 (FY16) would be negatively impacted by around 3%, and around 1% for Genting Bhd.

As for NFOs, a 1% hike in gaming tax/pool betting duties is estimated to negatively affect FY16 earnings for Berjaya Sports Toto Bhd by 6.5% to 7.5%.

“For Genting (target price [TP]: RM10), the impact of a potential gaming tax hike is less severe on its earnings. We remain optimistic about its long-term catalysts and position to benefit from improvement from its subsidiaries and overseas operations, while enjoying risk diversification.

“We continue to like Genting Singapore [plc] (TP: SG$0.90 or RM2.71) as we expect a less volatile year with a cleaner balance sheet and lower bad debt provision. Main downside risks, in our view, are on the regulatory front, luck factor and execution,” said Sia, who maintained his “neutral” call on the gaming sector, with top picks being Genting and Genting Singapore.

Effective March 1 this year, the excise duty on beer made from malt of RM7.40 per litre and 15% ad valorem tax was changed to RM175 per 100% volume per litre.

The amendment represents a shift from a volume-based tax structure to taxes based on alcohol content. In other words, the higher the alcohol content in a product, the higher the tax imposed.

Meanwhile, the local tobacco industry has seen three rounds of excise hikes between 2013 and 2015. Tax on tobacco was first raised 14% in September 2013, 12% in November 2014 and then a whopping 36% in November 2015.