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Philippines POGO tax bill passed by House committee

A bill to impose a new 5% tax on the annual gross income of Philippines Offshore Gaming Operators (POGOs) has moved a step towards passing into law, after it was passed by the House Ways and Means Committee.

Having been unanimously approved by the committee, the bill now progresses to a second reading in the House of Representatives.

The bill, which was introduced by Representative Joey Salceda, who chairs the Ways and Means Committee, seeks to amend Sections 22, 25 and 119 of the 1997 National Internal Revenue Code of the Philippines. It would replace the current 2% gross revenue tax imposed on Philippine Amusement and Gaming Corporation (PAGCOR) licensees.

The Section 22 amendment provides a definition of an offshore gaming licensee (OGL – or POGO). This states that an OGL may be a Philippines-based operator, or an offshore entity that engages the serves of any PAGCOR licensed service provider. In either case, such a company will be considered to be doing business in the Philippines, and therefore liable for the tax.

The tweak to Section 119, meanwhile, states that the 5% gross revenue tax applies to all offshore gaming companies that operate as a franchise of another business in the country.

Finally, the Section 25 amendment looks to ensure that foreign workers employed by POGOs pay tax in the country. These individuals would be liable for a 25% tax on salaries, wages, annuities, compensation, remuneration, honoraria and allowances received from a licensed operator, up from the originally proposed 15%. This would require staff to register with their local tax office upon taking a job with a POGO.

The committee hearing saw the country’s key regulatory bodies, the Cagayan Economic Zone Authority (CEZA) and PAGCOR, speak out in favour of the bill.

“We are fully supportive of the bill to tax the offshore gaming operators in the Philippines,” CEZA administrator and chief executive Raul Lambino said.

CEZA is the administrator and gambling regulator of the Cagayan Special Economic Zone and Freeport on the island of Luzon.

Lambino said the bill would provide much-needed legal certainty for POGOs, by confirming they do in fact operate in the Philippines, despite providing their services to other countries.

“The notion is that since the betting and the payment are happening outside the Philippines, then they are beyond the taxing jurisdiction of the Philippines,” he explained. “But our position in CEZA is that they are actually doing business in the Philippines through their service providers so they have to be taxed of the income that they are getting,” he added.

PAGCOR senior manager for policy development Jessa Mariz Fernandez also expressed support for the bill.

During the hearing she had sought clarification sa to whether the 5% revenue tax set out in the bill would replace the current 2% tax for its licensees, or be imposed in addition to the current levy. Salceda confirmed that it would replace, rather than add to, the current tax.

The bill’s introduction comes amid ongoing efforts by the Philippines authorities to ensure gambling licensees pay their fair share of tax in the country. Great Empire Gaming and Amusement Corporation (GEGAC) has already had operations temporarily halted by the Bureau of Internal Revenue (BIR), for failing to pay correct taxes.

It had to make an initial payment of PHP250m (£3.8m/€4.4m/$4.9m) before it agreed to settle the PHP1.05bn outstanding in three instalments to resume operations.

The BIR also padlocked the two offices owned by Altech Innovations Business Outsourcing in October, after the company failed to register as a value-added tax (VAT) payer, in violation of the country’s National Internal Revenue Code.


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