THE Bureau of Internal Revenue (BIR) has insisted it is not changing the rules in the middle of the game as it debunked the claim of the Philippine Amusement and Gaming Corp. that the 5-percent franchise tax on foreign-based Philippine Offshore Gaming Operators (POGOs) was not previously imposed.
Citing a copy of the BIR’s comment to the memorandum sent by Pagcor to the Office of the President, the Department of Finance (DOF) said in a statement on Monday that BIR upheld its position that foreign-based POGOs should be paying the 5-percent franchise tax, as clearly stated in a memorandum circular issued by the agency back in 2017.
BIR Commissioner Caesar Dulay said the imposition of the 5-percent franchise tax on POGO licensees is “not a new imposition nor is it being imposed retroactively,” noting that the bureau’s basis is Revenue Memorandum Circular (RMC) No. 102-2017 dated December 27, 2017, on the “Taxation of Taxpayers Engaged in Philippine Offshore Gaming Operations.”
In his comment to the memorandum sent by the Pagcor to OP regarding the franchise tax imposed on POGOs, Dulay said, “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.”
A copy of the BIR’s comment was furnished to Finance Secretary Carlos G. Dominguez III.
The Finance department said Pagcor pointed out in its memo that the 5-percent franchise tax was not previously imposed by the BIR, citing as basis an opinion issued by the Office of the Solicitor General (OSG) last December 19, 2018.
But Dulay said he already sent a letter to OSG on April 26 last year, reiterating the BIR’s stand and basis for the applicability of the 5-percent franchise tax to offshore-based licenses and operators.
Copies of the letter were also sent to Dominguez and Pagcor Chairman Andrea Domingo.
The BIR chief likewise pointed out that the legal opinion issued by the OSG on the issue “is not binding” because under “Section 4 of the NIRC [National Internal Revenue Code] as amended, the power to interpret provisions of the Tax Code and other tax laws shall be under the exclusive and original jurisdiction of the BIR Commissioner subject to review by the Secretary of Finance.”
In his comment to Pagcor’s memo, Dulay also corrected the erroneous claim that POGO operators are being assessed and are paying their corporate income taxes and value-added tax (VAT), DOF said.
He explained that POGO licensees or operators are not being assessed nor paying income tax and other taxes because the BIR’s RMC 102-2017 clearly states that in lieu of such taxes, they are only subject to the franchise tax.
“Only POGO service providers are subject to the regular taxes, such as income and VAT. However, both POGO operators and service providers whose employees earn compensation income need to withhold and remit the taxes due from them,” Dulay said.
Revenue rules provide that the foreign nationals compensation income shall be withheld 25 percent final withholding tax (WF), according to BIR.
“However, instead of remitting the 25 percent final withholding tax (WF), majority are only remitting the withholding tax on compensation (WC), which is based on lower rates depending on each employee’s total amount of income,” Dulay said.
Meanwhile, BIR also doubted Pagcor’s claim that Malaysia has opened its doors to offshore gaming licensees and is offering a 10-year tax moratorium on condition that 30 percent of the licensees’ total workforce are Malaysian citizens.
However, based on the BIR’s research, all forms of gambling—whether online or offline—are illegal in Malaysia, a predominantly Muslim country and bound by Shari’a law.
Sought by this paper for a copy of Pagcor’s memo to OP, Domingo said: “All correspondences to the President are confidential and may only be released by his office.”
Domingo also refused to give further details about their supposed memo to OP.
Image credits: Nonie Reyes
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