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Philippines present new gaming tax system

The Philippines Senate proposes change of tax law to greatly increase government revenue

On Tuesday, a bill seeking to plug holes in revenue laws that would allow the government to collect taxes more efficienly from Philippine Offshore Gaming Operators (POGOs) reached the Senate plenary.

Cayetano-1In her sponsorship speech for Senate Bill No. 2232, an Act Taxing Philippine Offshore Gaming Operations, Senator Pia Cayetano said the changes can generate additional revenues that can exceed the PHP7.18 billion collected by the Bureau of Internal Revenue (BIR) from POGOs last year.

Sen. Cayetano pointed out, “But considering the proliferation of Pogos in the country in recent years, the potential of this industry as a source of revenue for the government could have been much bigger,” More than PHP38 billion could have been collected in 2019 alone.

Cayetano attributed this to the lack of explicit tax provisions pertaining to offshore gaming licensees, including gaming operators, gaming agents, and service providers under the NIRC and explained:

“It will not only plug the loopholes in our country’s tax code that led to issues of confusion surrounding the operation of Pogos, but it will also prevent similar issues in the future, which could gravely undermine our government’s power to impose and collect the right taxes.”

“By addressing these gaps in our tax system, we can maximize the Pogo industry’s potential as a revenue source,” she further stated.

Sen. Cayetano said that under the bill, all offshore gaming licensees, regardless of whether Philippine or foreign-based are considered doing business in the Philippines, must pay 5 percent gaming tax on the gross gaming revenue or receipts derived from their gaming operations.

“This gaming tax will be in lieu of all taxes,” Cayetano noted.

Aliens employed by offshore gaming licensees and service providers will be subject to the 25% withholding tax, considering they are not engaged in trade or business within the Philippines.

Under the bill, the 25% final withholding tax based on gross income will be imposed on an alien individual, regardless of residency in the Philippines, term, and type of visa.

The misdeclaration on the actual monthly salary of foreign nationals working in the POGO industry is also addressed by the bill by providing a minimum final withholding tax due of PHP12,500 for any taxable month.

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