SC invalidates 5% tax on POGOs

The Supreme Court on Tuesday issued an order preventing the government from collecting a five-percent franchise tax from Philippine Offshore Gaming Operators or POGOs intended to provide additional funding to fight the COVID-19 pandemic.

Thirteen justices voted for the issuance of a TRO stopping the Bureau of Internal Revenue from implementing Section 11 of the Bayanihan 2, otherwise known as Republic Act 11494 and the revenue circulars from the BIR.

Associate Justice Marvic Leonen dissented.

The imposition of a 5-percent franchise tax aims to increase revenue collections by more than P1 -billion.

However, 14 foreign-based POGOs with an offshore gaming license from the Philippine Amusement and Gaming Corporation assailed the validity of Section 11 (f) and (g) of the Bayanihan 2 Law,” which imposes new taxes in the guise of merely listing sources of funding and are therefore an aberration because the entire law does not create or refer to the imposition of any new tax.”

The majority of the justices took the position that the portion of the law is a “rider provision.”

In its previous ruling, the high court declared that a “rider” violates the constitutional provision requiring that a bill, which may be enacted into law, cannot embrace more than one subject, which will be expressed in its title. 

However, Leonen said “the title and the statement of the policy included the raising of funds as among the purposes of the law and to grant the presumption of constitutionality to an urgent piece of legislation passed by Congress and signed by the President.”

Bayanihan 2 was enacted to provide more assistance to the pandemic-hit public and to prepare the country for economic recovery. It expired on Dec. 19.