There have been several stories in the media that reflect some of the above issues and illustrate the threats of mixing politics with gaming. Government involvement has been necessary in several cases involving the LVSC. The most prominent story in the recent past happened in March of 2011 when SEC officials subpoenaed files from the corporation in regards to violation of the Foreign Corrupt Practices Act. Allegations were made against the former Sands China CEO in regards to bribery of Macau officials.
The investigation is still ongoing. The LVSC has seen a 7% drop in stock prices since allegations were publically released. The more basic government involvement with any company, LVSC included, is that of taxes. The United States tax system for casino's is very similar to that of the countries in which LVSC operates abroad. Each casino is taxed based on the type of tables included within each different establishment. In the US there are federal, state, and local income taxes applied to casinos. This is also similar abroad.
Because of the complexity of taxes applied to casino companies there is no set tax rate that could be reported here. This is an exert from the LVSC 2010 10K report in regards to taxes. "In particular, government agencies may make changes that could reduce the profits that we can effectively realize from our non-U. S. operations. Like most U. S. companies, our effective tax rate reflects the fact that income earned and reinvested outside the U. S. is taxed at local rates, which are often lower than U. S. tax rates.
If changes in tax laws and regulations were to significantly increase the tax rates on non-U. S. income, these changes could increase our income tax expense and liability, and therefore, have an adverse effect on our effective tax rate, financial condition and results of operations. " I did find in that same 10k that the amount of deferred net income taxes reported in 2010 at 61,606 (in thousands). This was an almost a 75% increase from the year before in which the company paid 26,442 (in thousands) in deferred net income taxes.
Majority of this tax increase was do to an exponential growth in gaming revenues in Macau this past year (an almost 39% increase). Now we must also take into consideration the basic taxes for LVSC other operations, such as restaurants and hotels. But for the scope of this paper I felt focus on the casino aspect of government involvement is most pertinent. What the future holds for the LVSC The Las Vegas Sands Corporation is one of the leaders in its industry and I think that the future for this company is only going to get better.
As of today, according to Yahoo Finance, the LVSC is second in reported total revenue and the leader in the industry in total market cap. It is also seventh in net profit margin and fifth in the return on equity category within the industry. The Southeast Asian gaming industry is on a massive increase in terms of revenues generated and all four of the properties in that region are reaping the benefits. As an agreement with the Macau government, the LVSC does not have to pay corporate income taxes until 2013, which gives the LVSC a huge advantage to maximize on the booming Macau sector this next year.
The Wall street journal posted today (Feb. 12th, 2012) that the LVSC announced an $800 million dollar dividend payout throughout the course of this year. As "hot" of an issue as the increase in the number of states legalizing commercial gaming may be I think that with the poor economic conditions facing of so many of the states as well as the financial position of the country as a whole, that benefits of revenue generation are going to trump the issues of morality in the upcoming years.
Just as an example we can look at the 2011 results of LVSC's newest property in Bethlehem Pennsylvania. In the fourth quarter report of 2010, the property only brought in $59 million dollars in EBITDA and in 2011 reported $90. 8 million in EBITDA. The increase of leagalized commercial gambling states in the US will alleviate barriers to entrance for the Las Vegas Sand Corporation and, if their other properties are any sign, add to their continued growth and dominance within the industry.