PHILIPPINE Offshore Gaming Operations (POGO) will now be required to pay taxes for gross gaming revenues and regulatory fees.
This, after President Duterte signed Republic Act (RA) 11590 or an Act Taxing Philippine Offshore Gaming Operations as part of the priority legislative agenda to strictly regulate gambling while generating additional revenue for a government that borrowed heavily for the pandemic response.
Under the new law, POGOs or offshore gaming licensees will have to pay a 5-percent gaming tax, to be remitted to the Bureau of Internal Revenue (BIR) not later the 20th day following the end of each month.
The Philippine Amusement and Gaming Corporation (Pagcor) or any special economic zone authority or tourism zone authority or free port authority may also impose a regulatory fee POGOs, which shall not cumulatively exceed 2 percent of gross gaming revenue.
Gross gaming revenue or receipts refer to gross wagers less payouts.
The accredited service providers of POGOs will be subjected to the gaming taxes.
Of the gaming tax revenues collected from POGOs, 60 percent will be allocated to the following purposes: Universal Health Care Law (60 percent); Health Facilities Enhancement Program (HFEP) of the Department of Health (20 percent); and the achievement of the Sustainable Development Goals (20 percent).
Pagcor or the special economic zone authority must get the service of a third-party audit platform to determine the gross gaming revenue or receipts of offshore gaming licensees.
Philippine-based POGOs with a license from Pagcor must pay a 25-percent income tax for non-gaming revenues.
RA 11590 also reiterated that foreign nationals (FN) employed by POGO firms and their service providers are not exempt from paying income taxes.
Offshore gaming licensees and their service provider will be fined P20,000 for every FN without a tax identification number. The license of the erring establishment may also be revoked.
Those FNs who refuse to pay income tax may face deportation and be blacklisted by the Department of Labor and Employment (DOLE), Bureau of Immigration (BI) and other concerned agencies.
First year: P15.7B
The principal author of the Fiscal Regime for POGOs law sees the new law generating P15.73 billion in total public resources in its first full year and P144.54 billion over the next five years.
House Committee on Ways and Means Chairman Joey Sarte Salceda said the fiscal regime will help stabilize the POGO industry, which “was wracked by the uncertainty due to the Supreme Court temporary restraining order on their tax treatment.”
Salceda added the law will help the POGO industry “recover, since we’ve lost some of them to Cambodia already due to our uncertain tax regime in the past.”
“But they will operate under stricter terms. That is the spirit of President Duterte’s pronouncement earlier this year, and that is also the spirit of my proposal which I proposed as early as October 2019, way before the pandemic,” Salceda added.
“As long as they pay the right taxes and comply with all our laws, they will be able to operate,” Salceda said.
Industry shrinks by half
Salceda said that after the SC TRO and the Covid-19 pandemic, the POGO industry shrank by as much as 50 percent.
More than half, or 32 of the original 60 POGOs in the country have already left, according to Pagcor.
“[The remaining 32 Pogos] closed Philippine operations and most transferred to other jurisdictions,” Pagcor Chairman and Chief Executive Officer (CEO) Andrea Domingo told the BusinessMirror in a message on Thursday.
However, she did not elaborate on the reason behind the exodus of POGOs in the country, although Pagcor earlier warned that more POGOs will exit the country due to stringent BIR rules and the impact of movement restrictions amid the Covid-19 pandemic.
For their part, BIR Deputy Commissioner Arnel Guballa said on Thursday they cannot yet estimate the revenues that they may collect following the signing into law of the measure.
“Many had closed operations, we heard,” he told the BusinessMirror.
Asked whether BIR will still go after Pogos who have already closed their operations in the country, Guballa said they will still need to verify if they have unpaid taxes.
In March, Guballa told the Senate Committee on Ways and Means that total POGO tax collections this year could only reach P3.92 billion or 45.37 percent lower than its actual collection of P7.18 billion last year.
Guballa said the projection is based on their January 2021 collection data showing their tax haul from POGOs only reached P327.2 million during the month, plunging by 68.63 percent from P1.043 billion in the same period last year.
Clearer tax regime
Salceda said he expects the sector to begin recovering with the passage of a clearer tax regime, “plus the property sector will begin recovering as well, as POGOs are a key part of office occupancy in Metro Manila.”
“The most important sentence here is that POGOs are considered ‘doing business in the Philippines.’ They cannot escape our jurisdiction or the reach of our tax authorities. It is the single most consequential sentence in that law.” Salceda said.
The new law takes effect 15 days after its publication in the Official Gazette or in a newspaper of general circulation.
The Department of Finance (DOF) will issue the Implementing Rules and Regulation (IRR) for RA 11590 within 90 days after it takes effect.
Within 3 months after the RA 11590 becomes effective and three months thereafter, BIR will submit information pertinent to its implementation to Congress, which will determine if there is a need to adjust the tax rates. With Bernadette D. Nicolas