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Best of Howard Stutz

Gaming Guru

Howard Stutz

From Russia, with love: No gaming taxes if you build here

15 July 2012

A Russian territory that announced plans in May to place a multibillion-dollar gaming complex near one of its port cities, has sweetened the deal to entice casino companies to bid on the development: zero gaming taxes.

Nash Dom Primorye, the wholly owned government developer in the port city of Vladivostok in Russia's Primorsky Territory, released the Request for Concepts documents this week that invite major gaming companies to submit ideas for the first phase of the development.

Vladivostok is one of the four regions allocated by the Russian government to have gaming. The mountainous region bordering China and Korea, is roughly two hours flight time from Seoul and Tokyo.

Plans call for 12 casinos with the first phase of a three-part rollout to be completed by 2016 and a planned total investment of about $2 billion.

In a document made public Thursday, Nash Dom Primorye said it was willing to trade zero gaming taxes in exchange for creating jobs and developing the area's tourism industry.

Union Gaming Group Managing Director Bill Lerner said the deal might be too good to pass up.

"Up to this point, we haven't heard of much interest in the region from international operators," Lerner wrote in a research report. "That said, the region seems to be gaming-friendly from a development standpoint, and we expect operators to give it a look given the low tax rate and proximity to Asia."

The initial guidelines offer companies more lucrative terms than Macau and Singapore. Macau, the world's largest gaming market with $33.5 billion in gaming revenues in 2011, has a 39 percent tax rate. Singapore taxes gambling revenue at around 15 percent.

Nevada has a 6.75 percent tax on gaming revenue.

"Press reports indicate that the region is willing to offer close to zero gaming tax rate in exchange for developers creating jobs and investing capital," Lerner said. "The hope for the region is to draw customers to from Asia, though Russian citizens will not be restricted from gaming. The government is leaning toward a model similar to Singapore, though there will be no restrictions on gaming versus nongaming space."

Nash Dom Primorye General Director Marina Lomakina said the developer is seeking concepts that focus on tourism development.

"We look forward to receiving Request for Concepts responses that capitalize upon Vladivostok's strong linkages with Asia," Lomakina said.

Russia's move to attract international companies comes at a time when other Asian countries, including the Philippines and Vietnam, are developing casino resorts to boost tourism revenues.

Taiwan's Matsu island group also voted recently to allow casino resorts.