Paradise Co’s operating profit would fall just 9% under proposed tourism fund changes — not the 22% worst-case feared — thanks to a KRW300 billion revenue threshold that shields most of its income.
Paradise Co tourism fund contribution changes would cut operating profit by roughly 9%, not 22%, according to Hana Securities. A new KRW300 billion revenue threshold means the 15% levy applies only to revenue above that level. Paradise City would pay an extra KRW20 billion. Paradise Walkerhill would pay KRW2.5 billion. The combined hit is KRW22.5 billion, far below the KRW60 billion feared under a flat-rate increase.
- How the New Banding System Works
- Paradise Co’s Exposure: The Math
- Why Rivals Face Different Pressures
- The Existing Levy Structure
9%. That is how much Hana Securities estimates Paradise Co’s operating profit would decline under proposed changes to South Korea’s Tourism Promotion and Development Fund contribution rules. The figure is less than half the 22% worst-case scenario some analysts had modelled. The difference comes down to banding. The Ministry of Culture, Sports, and Tourism has clarified that a new 15% levy would apply only to revenue above KRW300 billion ($212 million), not to total revenue. Paradise City’s projected KRW700 billion in 2028 revenue would trigger the higher rate on just KRW400 billion above the threshold — an extra KRW20 billion. Paradise Walkerhill, at KRW350 billion, would pay only KRW2.5 billion more. The combined KRW22.5 billion hit is a fraction of the KRW60 billion feared under a flat-rate hike. However, the relief is not universal. Lotte Tour Development and Inspire Entertainment Resort sit in different positions. One breaks even. The other bleeds cash. The banding helps Paradise Co precisely because it is already large.
How the New Paradise Co Tourism Fund Banding System Works
South Korea’s current tourism fund levy uses a three-tier structure. Casinos pay 1% on gross gaming revenue up to KRW1 billion. They pay 5% on GGR between KRW1 billion and KRW10 billion. They pay 10% on everything above KRW10 billion. The proposed reform adds a fourth tier. Revenue above KRW300 billion would face a 15% levy. Crucially, the 15% applies only to the amount above the threshold, not the entire revenue base.
Hana Securities analyst Lee Ki-hoon noted that clarification from the ministry confirmed this marginal-rate design. “The planned structure would create a new high-revenue category of KRW300 billion and above, with the 15 percent levy applied exclusively to revenue surpassing that amount,” he wrote. The structure is progressive, not proportional. It protects smaller operators while extracting more from the largest. Paradise Co benefits because its two main properties — Paradise City and Paradise Walkerhill — sit just above and just below the threshold. Only Paradise City triggers the new band in a meaningful way.
The tourism fund itself is under strain. A 2024 cut to South Korea’s departure levy — from KRW10,000 to KRW7,000 — erased roughly KRW135 billion in annual funding. The fund now spends KRW55 billion per year on interest alone from pandemic-era borrowing. Casino operators have been asked to contribute more. The question is how much more, and from whom. The banding proposal answers both.
Paradise Co’s Exposure: The Math
Lee Ki-hoon ran the numbers. Paradise City at Incheon is projected to generate KRW700 billion in 2028 revenue. Under the new banding, KRW300 billion is taxed at the existing 10% rate. The remaining KRW400 billion faces the new 15% rate. The marginal increase is 5 percentage points on KRW400 billion. That equals KRW20 billion in additional contribution. Paradise Walkerhill in Seoul, at KRW350 billion, would pay the extra 5% on just KRW50 billion — KRW2.5 billion. Combined, the two properties face KRW22.5 billion in new tourism fund payments.
The KRW22.5 billion figure is less than 38% of the KRW60 billion that a flat 15% rate on all revenue above KRW10 billion would have generated. That is why the profit hit drops from 22% to 9%. The threshold acts as a buffer. It shields the first KRW300 billion from the higher rate. For Paradise Co, which derives the bulk of its revenue from two properties, that buffer is substantial.
However, the 9% estimate assumes no behavioural change. If Paradise Co responds by cutting marketing, reducing staffing, or delaying capex, the revenue base itself could shrink. The analysis is static. The market is dynamic. Lee acknowledged this implicitly by framing the 9% as an estimate based on current projections. Actual results will depend on how the company manages the higher cost base.
Why Rivals Face Different Pressures
The banding proposal does not treat all operators equally. Lee highlighted two competitors to illustrate the divergence. Lotte Tour Development, which operates Jeju Dream Tower Casino, recorded casino revenue of KRW470 billion last year. That is above the KRW300 billion threshold. However, Lee noted that the company “only broke even at the pre-tax level.” A KRW22.5 billion increase in fund contributions — or whatever the marginal amount would be for Lotte Tour — would push it into loss. The threshold protects revenue. It does not protect thin margins.
Inspire Entertainment Resort faces a different problem. The Incheon property generated KRW270 billion in GGR last year — below the hypothetical KRW300 billion threshold. It would not trigger the new 15% band at all. However, Inspire recorded a KRW46 billion operating loss and KRW116 billion in financial costs. The tourism fund is not its problem. Solvency is. Lee’s point is subtle but important. The levy debate distracts from the fact that some South Korean IRs are structurally unprofitable regardless of tax rates.
SK Securities reached a similar conclusion for Lotte Tour in a separate note. It saw “limited impact” from the proposed regulatory reforms on the Jeju operator. The assessment reflects Lotte Tour’s smaller scale relative to Paradise Co and its different cost structure. For coverage of how South Korea’s casino regulatory landscape is shifting, AGBrief tracks regional policy developments.
The Existing Levy Structure
The current Tourism Promotion and Development Fund Act sets three bands for casino GGR contributions. The first KRW1 billion is taxed at 1%. Revenue between KRW1 billion and KRW10 billion faces a 5% rate. Everything above KRW10 billion is taxed at 10%. The structure has been in place for years. It was designed when South Korea’s casino sector was smaller and less concentrated. The KRW10 billion top threshold was breached by every major operator long ago.
The proposed KRW300 billion band reflects the sector’s growth. Paradise City alone generates more than double that amount. The old structure capped the marginal rate at KRW10 billion, meaning the largest operators paid the same percentage on their billionth won as on their billionth dollar. The new band restores progressivity at the top end. It is a tax increase dressed as a technical adjustment.
The tourism fund itself finances industry loans, workforce training, and international marketing. It is the seed money for South Korea’s tourism sector, as Korea Tourism Organization president Park Sung-hyeuck described it. The fund borrowed heavily during COVID-19 and now faces a KRW55 billion annual interest bill. Casino operators are a logical target for replenishment. The question is whether higher contributions will dampen investment in an industry that already struggles with profitability. Paradise Co can absorb a 9% profit hit. Not every operator can.
Frequently Asked Questions
How much would Paradise Co’s profit fall under the new tourism fund rules?
Hana Securities estimates a 9% decline in operating profit, not the 22% worst-case scenario. A KRW300 billion revenue threshold means the 15% levy applies only to revenue above that level, shielding most of Paradise Co’s income.
What is the new tourism fund banding proposal?
A new fourth tier would apply a 15% levy on casino GGR above KRW300 billion. The existing tiers remain: 1% up to KRW1 billion, 5% between KRW1 billion and KRW10 billion, and 10% above KRW10 billion. The 15% applies only marginally.
How much extra would Paradise City pay?
Paradise City’s projected KRW700 billion 2028 revenue would trigger an extra KRW20 billion in tourism fund contributions. The 15% rate applies only to the KRW400 billion above the KRW300 billion threshold, at a 5 percentage point premium over the existing 10% rate.
Would Lotte Tour Development be affected?
Lotte Tour’s KRW470 billion revenue exceeds the threshold. However, the company only broke even at the pre-tax level last year. SK Securities sees “limited impact” from the reforms. The marginal levy would be smaller than for Paradise Co but could still push the company into loss.
Why is the tourism fund under pressure?
A 2024 cut to the departure levy from KRW10,000 to KRW7,000 erased roughly KRW135 billion in annual funding. The fund borrowed during COVID-19 and now pays KRW55 billion per year in interest. Casino operators are being asked to contribute more to replenish reserves.
When will the new rules take effect?
The Ministry of Culture, Sports, and Tourism has clarified the planned structure but has not announced a formal implementation date. The proposal is still under discussion. Operators are modelling scenarios but cannot yet adjust budgets with certainty.
This article has been thoroughly researched and reviewed by the CasinoBait editorial team to ensure accuracy and relevance for Asian casino players.
