MALACAÑANG on Tuesday junked the Office of the Solicitor General’s (OSG) opinion that Philippine Offshore Gaming Operators (Pogo) cannot be taxed as it sided with the Department of Finance (DOF) to finally settle the debate once and for all.
Presidential Spokesman and Chief Presidential Legal Counsel Salvador S. Panelo argued that Pogos—whether domestic or foreign corporations—are taxable.
Reacting to the “difference of opinion” of OSG and DOF, Panelo pointed out the DOF has the primary mandate based on the Administrative Code to formulate, institutionalize and administer fiscal policies in coordination with other concerned subdivisions, agencies and instrumentalities of the government.
Socioeconomic Planning Secretary Ernesto M. Pernia, meanwhile, told reporters on Tuesday that he supports the efforts of Congress to legislate Pogo taxes that will be similar to franchise taxes.
Albay Representative Joey Salceda recently filed a bill seeking to impose a 5-percent franchise tax on revenues generated by Pogos and their service providers.
“Yes, definitely, definitely [support the bill]. It’s about P45 billion tax take, tax revenue take. It’s not coffee money,” Pernia said.
Neda Undersecretary for Planning and Policy Rosemarie G. Edillon said imposing taxes on Pogos can also be a means to regulate these firms.
Edillon said this will work toward discouraging possible excesses in gambling.
“In general, you also use fiscal policy to encourage the good and discourage the bad. So in a way this will work to discourage excesses,” Pernia said.
“For Pogos that are domestic corporations, they are covered by Section 23 [E], Chapter II of the National Internal Revenue Code [NIRC] and their income shall be subjected to Philippine taxes regardless of whether the same was derived from a source outside of the Philippines,” Panelo said in a news statement issued on Tuesday.
“As for those Pogos considered as foreign corporations, they too are taxable but only for incomes which they derived from sources within the country. This is pursuant to Section 23 [F], Chapter II of the NIRC,” he added.
However, it also noted that the opinion of the OSG was issued in response to and was based on representations of an official from the Philippine Amusement and Gaming Corp. (Pagcor), adding that this was subject to change depending on the factual circumstances.
Over the weekend, Solicitor General Jose Calida said Pogos cannot be taxed, as he was quoted in reports, saying the “source of income of offshore-based operators is the placement of bets on its online betting facility derived from sources without the Philippines.”
However, Finance Secretary Carlos Dominguez reportedly said Pogos are providing services to their counterparts in the Philippines, making them subject to income tax.
Despite this, the Palace expressed confidence that the DOF, together with the Bureau of Internal Revenue (BIR), can competently evaluate the respective charters and operations of these entities in a bid to subject them to Philippine taxes in accordance with the law.
“While the matter is being studied at length by the DOF, what is clear is that the State cannot be denied its right to collect on all applicable taxes on any entity or individual. This is particularly true with regard to the case of individuals working in these companies for certainly, their compensation, salaries or wages for the services they render here are considered taxable income under Section 23 [A] & [D] of the NIRC,” Panelo said.
The government, he added, has the authority to tax and that nothing can stop the administration from doing this.
“It has been pronounced by the Supreme Court, in a plethora of cases, that ‘Taxes are the nation’s lifeblood through which government agencies continue to operate and with which the State discharges its functions for the welfare of its constituents,” Panelo said. “In order to defray the expenses of the government, the State has, among its inherent powers, the authority to tax. This administration will not be stymied nor estopped by technicalities caused by the exploitation of developing technologies in collecting what is due the government.”
On Monday, the House Committee on Ways and Means endorsed for plenary approval a bill imposing on Pogo companies a 25-percent franchise tax and their workers, a 25-percent income tax.
Salceda, the panel chairman and author of House Bill 5257, said these Pogo taxes will provide P45 billion for the national government.
While Salceda said there are currently 60 Pogo operators in the country, only 10 are registered with the BIR.
The Department of Finance (DOF), citing its initial list, said there some 138,000 foreigners working in the Pogo industry, 54,241 of whom have been given alien employment permits, with another 83,760 holding special working permits.
The government has also since started its crackdown on delinquent Pogos as the DOF ordered BIR to close down those which fail to withhold and remit the proper amount of taxes from their employees. With Cai U. Ordinario
Image credits: Asia Times