South Korea’s Proposed 15% Casino Levy Cap Raises Profit Concerns

SEOUL: South Korea’s proposed casino levy increase could cut 2026 operating profit estimates by as much as 37%, analysts said. The higher payments could also restrict capital spending as operators prepare for MGM Osaka’s planned 2030 opening.

The government is considering raising the maximum contribution paid by mainland foreigner-only casinos to the Tourism Promotion and Development Fund from 10% to 15% of gaming revenue. The proposal remains under discussion and would increase the cap within the existing progressive system rather than automatically impose a flat 15% charge on every operator.

GKL Faces Largest Estimated Profit Reduction

Shinhan Investment & Securities analyst Ji In-hae estimated that the proposed change would reduce Grand Korea Leisure’s 2026 operating profit forecast by 37%. Paradise Co.’s estimate would fall by 29%, while Lotte Tour Development could face a 21% reduction if a comparable increase were applied to its Jeju operations.

GKL’s projected operating profit would decline from KRW66.3 billion to KRW41.7 billion, according to the brokerage estimates. Paradise’s forecast would fall from KRW181.4 billion to KRW129.5 billion, while Lotte Tour Development’s estimate would decrease from KRW200.1 billion to KRW158.1 billion.

“Although there are no precise guidelines yet, a deterioration in investor sentiment and increased uncertainty regarding future earnings outlooks are inevitable, so we are uniformly lowering the target share prices for the three foreign-owned casino companies,” Ji said.

Shares in the three operators fell sharply after reports of South Korea’s proposed casino levy overhaul emerged. Analysts have since reduced target prices while emphasizing that the final contribution thresholds, implementation date and affected operators have not been confirmed.

Jeju Casinos Face Separate Regulatory Process

The current government review applies to mainland casinos overseen by the Ministry of Culture, Sports and Tourism. Casinos on Jeju Island operate under the Special Act on Jeju Special Self-Governing Province, meaning separate legislation would be required to increase their contribution rate.

That distinction makes the immediate impact less certain for Lotte Tour Development, which operates Jeju Dream Tower. Hana Securities analyst Lee Ki-hoon said current concerns may be excessive, but investor uncertainty could persist if Jeju authorities consider a similar increase.

The wider reform proposal also includes periodic casino license renewals and prior government approval for changes involving major shareholders. Those measures would replace parts of the current licensing framework with more regular reviews and tighter oversight.

Operators Could Reduce Capital Spending

Analysts warned that reduced cash generation could force foreigner-only casino operators to delay renovations, hotel development and other non-gaming investments. The sector has invested in integrated resort facilities as it competes for international visitors from China, Japan and other regional markets.

The timing is significant because the MGM Osaka integrated resort is scheduled to open in 2030. The multibillion-dollar Japanese development will include a casino, hotels, entertainment venues, retail space and convention facilities.

KB Securities analyst Choi Yong-hyun said South Korean operators must prepare for increased competition from Japan but cannot maintain competitiveness without continued capital expenditure. The government has not announced a final rate or implementation schedule, leaving operators and investors awaiting further details of the reform.

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