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PlayAGS Mexican Tax Penalty Is Nearly One Third of Annual Cash Flow
Gaming firm accuses Mexican tax authority of breaking the law in how it conducted a recent audit.
August 7, 2023
After an audit PlayAGS Inc. (AGS), a maker of electronic gaming devices, Mexican tax authorities concluded the company’s electronic gaming machines (EGMs) were imported
during certain periods do not comply with their documentation standards to demonstrate compliance with NAFTA and that therefore certain taxes were omitted when the machines were imported.
The Mexican tax authorities, according to PlayAGS, plan to make an assessment of the omitted taxes together with interest, fines, and surcharges of up to approximately $9 million.
Though PlayAGS claims the Mexican tax authority did not conduct its audit in compliance with Mexican law and regulations, the company plans to negotiate a potential resolution. In its latest quarterly report, PlayAGS suggested the total will be less than the figure communicated:
“The discussions, with PRODECON’s assistance, are expected to nullify or result in a significant reduction of the anticipated tax to be assessed against the Company.”
If PlayAGS is required to pay $9 million in back taxes, it would be the equivalent of:
—2.9% of 2022 revenue
—22.6% of 2022 operating income
—30.4% of 2022 free cash flow
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