Philippines Taxman Bickers with PAGCOR Over POGO Franchise Fees

Philippines Taxman Bickers with PAGCOR Over POGO Franchise Fees

Apart from drummed up media plus political scandals, the true reason why Philippine Offshore Gambling Operators (POGOs) are usually in trouble in the Philippines is because of taxes.

The Bureau of Internal Revenue (BIR) has once again announced that all foreign based operators must pay a 5% franchise tax, and have always had to. However, the Philippine Gaming and Amusement Corp (PAGCOR), regulator of the industry, has a different view. The franchise tax must be settled for POGOs to restart their businesses.

BIR Commissioner Caesar Dulay additionally noted that the tax is “not a new imposition nor is it being imposed retroactively.”

He continued, “From the beginning, our Bureau has maintained the position that the said tax applies to all POGO licensees and operators and there was no change of rules midstream.”

That’s different from a recent PAGCOR memo which states otherwise. The highlight that the BIR, in an Office of the Solicitor General (OSG) memo dating to late 2018, did not propose a compulsory 5% franchise tax.

Dulay states that PAGCOR is ignoring an earlier memo from late 2017, and specifically, a section on “Taxation of Taxpayers Engaged in Philippine Offshore Gaming Operations.”

Section RMC 102-2017 states:

“The entire gross gaming receipts/earnings or the agreed or pre-determined minimum monthly revenues/income from Gaming Operations under existing rules, whichever is higher, shall be subject to a franchise tax of five percent (5%), in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description. This income is therefore exempt from any kind of tax, income or otherwise, as well as fees, charges or levies of whatever nature, whether national or local.”

Initially, PAGCOR representatives have maintained that they have no had no influence in the taxation, or enforcement of taxes, for POGOS. One spokesperson suggested that if POGOs weren’t okay with the taxes being asked of them, they were allowed to protest against it.

Dulay, however, appears to rebuke PAGCOR for taking that position. In addition, he noted that in a letter to the OSG on April 26 last year, BIR was clear that the franchise tax had to be paid, and the perspective of OSG is non-binding too.

Some time back, PAGCOR cautioned that if the Philippines stress of taxing the sector beyond what it was willing to pay, the whole thing might just decide to migrate to sunnier regions, with Malaysia being a good example.

Dulay, possibly playing more to local opinion than industry leaders, denied that possibility, suggesting the predominantly Muslim nation would never let a gambling sector to grow.


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