Nuevo León, Mexico Scraps New Casino Tax Plan After it Fails Miserably

Posted on: December 20, 2022, 07:26h. 

Last updated on: December 20, 2022, 03:38h.

The local government in Nuevo León, Mexico, had a grand plan. It would increase its tax revenue by changing the tax scheme for casinos in the state. However, lawmakers failed to take into account one important aspect, and have now been forced to rewrite the rules once more.

Mexican flag
The Mexican flag flies at a popular scenic point in Monterrey in the state of Nuevo León, Mexico. The state is reversing a new tax rule that failed as it attempted to increase taxes on gaming properties. (Image: Nuevo Nuevo León)

Instead of charging casinos taxes based on the results of their operations, the government changed the law this year to charge a new rate for every slot machine in operation. The outcome was inevitable – casinos reduced the number of slots they offered.

As a result, the government is eliminating the law completely. Something else will come. But hopefully, only after a more thorough discussion.

The House Wins, Even Against the Government

The reform led, in theory, to increased tax collection, because it covered all slots a gaming facility had under its roof. But because properties could easily remove machines, they reduced their footprints, and consequently, their tax liability.

Noting that the proposed strategy didn’t produce the expected results, the plenary session of the Nuevo León Congress approved a reform by repeal that eliminates the taxes for registering machines in casinos.

In addition to the way the gambling houses were able to circumvent the new regulations, some lawmakers believed the reform overstepped the government’s boundaries. As a result, the majority of the deputies of the chamber endorsed the elimination of the tax, with 26 votes in favor, 13 against, and one abstention.

The gaming operators argued that the new tax hurt not only them, but consumers as well. The increase from 10% to 15% affected the properties’ bottom line, which led to a reduction in jobs to counter the losses.

One industry representative told lawmakers that the slot market shrunk by about 40% following the implementation of the new law. In other words, the tax revenue generation attempt actually created a loss of 35%.

New conversations are taking place to determine how to proceed, and the government is finally involving the gaming industry. They are working on a joint resolution to address the tax situation, but changes won’t be possible until after the new year. The Nuevo León government, as with most, is already on vacation.

Mexico Revenue to Drop Before Improving

The new tax was an effort to deliver more revenue to local communities, which have been suffering as a result of COVID-19. Recently, a new wave of infections has arrived in Mexico, which is going to make recovery more difficult.

There were no new cases from December 9 through 11, but then things went downhill. There were 7,662 new COVID-19 patients on December 12 and 14,398 on December 17.

Nuevo León has been hit hard by the resurgence. It already brought back anti-COVID-19 protocols a week ago, which included the use of facemasks in casinos and in other closed spaces. The state was one of several that began witnessing a higher-than-average number of new cases.

The start of 2022 brought some relief to Mexico, with tourism returning to pre-pandemic levels. The 36.8 million visitors who arrived generated $16.48 billion in purchases from January to July, and the figures continued to climb as the year progressed.

The new COVID-19 surge will impact the improvement, but not cancel it out. Still, locals are complaining of a rise in inflation, which is cutting into discretionary spending. Inflation hit 7.8% last month, which means residents have less money to spend on regular activities, including holiday shopping and gambling.