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POGOs: 5% tax approved by Philippine House

What does this mean for POGOs? Will this trigger another mass exodus?

The House approves, on final reading, House Bill 5777 - a law which imposes the 5% tax on Philippine Offshore Gaming Operations (POGO).

The final vote was 198-13-2, approving the bill that amends the National Internal Revenue Code of 1997.

With this new tax scheme, the Philippine government is projected to earn approximately P45billion from POGOs.

The debate on whether POGOs should be taxed 5% has been going on for a number of months now, even dating back to early 2020.

The Taxman stance

Back in July the Bureau of Internal Revenue (BIR) reminded all foreign-based Philippine Offshore Gaming Operators (POGOs) that they should pay the 5 percent franchise tax before resumption of operations.

BIR Commissioner, Caesar Dulay, had stated that the franchise tax on POGOs is not something new as it was clearly stated in a memorandum circular issued in 2017. The commissioner stated:

Caesar Duly BIR - SiGMA NEWS

“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.”

The representative's viewpoint

There has been some concerns over whether POGOs should be taxed 5% since it is uncertain which operators are registered as a domestic or a foreign company.

Ace Barbers, a Surigao del Norte 2nd District Representative, put that debate to bed as he stated that all POGOs that are licensed by the Philippine Amusement and Gaming Corporation (PAGCOR) should be subject to the 5% franchise tax, whether they are foreign or domestic operators.

The representative stated that the Presidential Decree (PD) No.1869 provides no distinction between operators whether they are domestic or foreign according to the 5% tax.

Ace Barbers

“These non-SEC registered POGOs cannot deny the fact that they have brought in their equipment, rented or bought office facilities, and have employees working in the Philippines. Thus, they cannot claim they have no physical presence here.”
“I therefore believe that there is no legal issue for the Bureau of Internal Revenue to impose and collect franchise tax from all POGOs be it domestic or offshore.”

The dilemma

POGOs have played a massive role in the Philippine's economic recovery from COVID-19, contributing PHP94.7 to 104billion with PAGCOR continually emphasising the importance of POGOs to the economy due to all the revenue generated.

Furthermore, in September 2020, there was a mass exodus which had a negative impact on the economy, especially since POGOs cover an estimated 11% of total leasable office space in Metro Manila, or about 1.34 million square meters, effecting the real estate market. POGOs also generate thousands of jobs and if this newly imposed tax drives more of them away, then Philippines will experience a massive hike in unemployment.

The CEO and President of PAGCOR, Andrea Domingo, also highlights the importance of POGOs in the Philippines, especially when it comes to employment. In an exclusive piece with SiGMA, Andrea Domingo, who was also cover story for SiGMA issue, stated that:

Andrea Domingo - SiGMA NEWS

Whatever PAGCOR earns, 75% goes back to the national government - we retain 25% for our social civic projects and for social civil projects for the President of the Philippines. It is also important because it shows that through regulation - if you do it with sincerity, competence and integrity, from 56 million pesos contribution of offshore gaming operations in 2016, it is now a multi-billion pesos revenue generating operation under PAGCOR.

What is more important, is as other nearby nations are realising - what the POGO operations generate in terms of gaming revenues is not the main event - it is the employment generation that it creates in the locality. 

There is no doubt that POGOs have contributed massively to the economy in the Philippines and with lawmakers putting pressure on these operators to pay more tax and with some even considering to eliminate them completely, it seems like the Philippines are playing a dangerous game. POGOs are pivotal to their economic recovery and also the regeneration of certain areas - biting the hand that feeds them might trigger another mass exodus. An exodus that they may be left to rue.

 

SiGMA News:
Offered in 10 key languages, SiGMA is the only events and media company that brings you round-the-clock coverage of this growing global phenomenon from reporters all around the world, with content covering everything from podcasts to in depth interviews and thought leadership articles. SiGMA believes in regulated and responsible gaming and are advocates for regulation worldwide - which is why they’ve built solid relationships with authorities like MGA, Coljuegos, PAGCOR, and other leading stakeholders.

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