Market structure and casino taxation in tourist resorts

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Abstract:

This article examines the association of tax effects with market structure for casino gaming. We show that if market structure is uncompetitive, much of casino taxation falls on tourists whose demand is inelastic relative to supply. The tax is likely to be efficient under strong external demand if imposed on oligopoly casinos with a monopoly location in a cross-border market. The likelihood of economically ‘good’ taxation is greater under oligopoly than under competition but lower than under monopoly. Casino taxes should be lowered in a more competitive market with weaker external demand. Our prediction is consistent with the evidence found from casino tourism development in Macao with ‘high’ gambling taxes.

Keywords: D51; F10; H21; Macao; O12; casino taxation; efficiency; market structure; oligopoly

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2013.864037

Affiliations: Department of Finance and Business Economics, Faculty of Business Administration, University of Macau, Av. Padre Tomás Pereira, Taipa, Macao, China

Publication date: April 3, 2014

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