The House of Representatives’ ways and means committee on Monday approved a bill imposing taxes on companies and workers engaged in Philippine offshore gaming operations.
The committee, chaired by Rep. Joey Salceda of Albay, unanimously approved House Bill 5267 directly imposes a 5-percent franchise tax on POGOs on top of the existing 2 percent regulatory fee.
The committee will have the approved bill readied for plenary action.
The 5 percent covers all offshore gaming companies on gross receipts derived from gaming operations covered by the law granting the franchise, on top of the taxes already imposed under the National Internal Revenue Code.
Salceda added that the measure provides that foreign employees working for POGOs who earn a minimum annual salary of P600,000 will be slapped a 25 percent tax on their salaries, wages, annuities, compensation, remuneration, honoraria, and allowances.
He said taxing POGOs will result in the collection of P45 billion in additional revenues for the government, with the state-run Philippine Amusement and Gaming Corp. being the lead agency tasked to collect the taxes and remit these to the Bureau of Internal Revenue (BIR).
Salceda, in the bill’s explanatory note, said it is necessary to determine the taxability of POGOs given their proliferation in the country in recent years.
“While the Bureau of Internal Revenue [BIR] has issued Revenue Memorandum Circular No. 102-2017 which clarified the tax treatment for these facilities and associated services, a law that settles questions of taxability, through amendments in the National Revenue Code, will once and for all address confusion on the taxation of this emerging industry,” he said.
Salceda added that the measure seeks to definitively answer that POGOs indeed do business in the country, as the services are rendered in the country.
“Codifying the tax regime for POGOs will provide the government a broader set of levers with which to monitor and oversee the industry and to stabilize the gyrations in tax revenue intake and enforcement,” Salceda said.
Finance Secretary Carlos Dominguez III on Monday said POGOs should be taxed, a position that runs counter to an earlier opinion of the Office of the Solicitor General, which said this kind of business cannot be taxed.
In a statement to reporters, Dominguez said the primary jurisdiction to interpret the Tax Code provisions lies with the Bureau of Internal Revenue.
“The BIR issued an opinion to this effect months ago saying that the situs of income is where the services are rendered,” Dominguez said.
“Thus, since POGOs are providing services to their counterparts in the Philippines, they are subject to income tax,” he said.
He said the same was true for VAT, which also “was imposed on services rendered in the Philippines.”
But in an opinion given to the state-run PAGCOR and BIR, the Office of the Solicitor General said POGO operators could not be taxed based on the source of income principle under the country’s tax code.
Solicitor General Jose Calida said the test of taxability “is the source and correspondingly, the source of an income is that activity which produced the income.”
Calida said an offshore gaming operator, even if employing a Philippine-based service provider, earns “from bets placed by its registered foreign subscribers.”
Earlier, the Department of Finance said it was aiming to collect an estimated P22 billion annually in income taxes from Chinese workers employed in the Philippines’ booming online gaming industry.
Minority Leader Senator Franklin Drilon warned that not taxing POGOs could open a can of worms in the country’s tax system—and noted that the OSG cannot interpret tax laws.
“I do not think that we are prepared to face the consequences that may arise from such an erroneous opinion,” said Drilon.
He branded as “misplaced and misguided” the opinion of the OSG’s opinion that POGO cannot be taxed.
Senator Joel Villanueva, chairman of the Senate committee on labor, employment, and human resources development, said POGOs should pay appropriate taxes just like any foreign entities.
“Regardless of the industry, any foreign entity operating in the country must pay the appropriate taxes in accordance with prevailing laws. If you don’t pay taxes, your operations are illegal, plain and simple,” Villanueva said in a statement.
“If this is the argument that some POGOs are using to run away from taxes, their contention does not have a leg to stand on,” Villanueva added.
He said the BIR is already shutting down POGOs that are not paying its taxes.
“Our chief tax assessor and collector, the Bureau of Internal Revenue, has already begun clamping down on tax-dodging POGO firms,” Villanueva said.