Breathing space for Pogo pushed, Palace unmoved

Offshore gaming firms should be taxed, Malacañang said Tuesday, contradicting Solicitor General Jose Calida and siding with Finance Secretary Carlos Dominguez III on the issue.

“While the matter is being studied at length by the DOF [Department of Finance], what is clear is that the state cannot be denied its right to collect on all applicable taxes on any entity or individual,” Presidential Spokesman Salvador Panelo said.

Panelo also noted that the DOF has the primary mandate to “formulate, institutionalize and administer fiscal policies in coordination with other concerned subdivisions, agencies and instrumentalities of government.”

“As such, the discretion of the DOF, alongside the Bureau of Internal Revenue [BIR], carries significant weight on matters of taxation,” he said.

Calida previously said POGOs could not be taxed by the government based on the “source of income” rule under the Tax Code of the Philippines, while Dominguez said it was not the Office of the Solicitor General’s duty to interpret tax law.

Panelo, who also serves as President Duterte’s chief legal counsel, said POGOs are domestic corporations and are covered by the National Internal Revenue Code.

“Their income shall be subjected to Philippine taxes regardless of whether the same was derived from a source outside of the Philippines,” he said.

“As for those POGOs considered foreign corporations,” he said, “they too are taxable but only for income which they derived from sources within the country.”

Quoting the Supreme Court, Panelo said taxes are the nation’s lifeblood, used by government agencies to operate.

On the other hand, the head of the Philippine Amusement and Gaming Corp. said POGOs should be given some “breathing space” to grow before they are taxed heavily by the government.

PAGCOR chairperson Andrea Domingo offered this view after the House committee on ways and means approved a bill that would impose new taxes on the revenues generated by POGOs and their service providers.

“I would recommend that and I can only pray they will listen,” Domingo said in a statement.

Domingo said fair and reasonable taxation is good for the industry, but said over-taxation would kill off legitimate operations while leaving the illegal ones untouched.

On Monday, the House committee on ways and means approved House Bill 5267 that would impose new taxes on the revenues generated by POGOs and their service providers.

The bill was proposed by Albay 2nd District Rep. Joey Salceda. The measure will now have to be sponsored for second reading approval in he plenary.

If passed into law, HB 5267 would require POGOs to pay a 5-percent tax on gross receipts from their operations covered by the law granting their franchise.

Foreign employees working for POGOs who earn a minimum annual salary of P600,000 would also have to pay an additional 25 percent tax on their salaries, wages, annuities, compensation, remuneration, honoraria, and allowances.

Salceda said the additional taxes would raise P45 billion for the national government annually.

Dominguez on Monday said POGO operations should be taxed, a position that contradicted the earlier opinion of the Office of the Solicitor General which said this kind of business could not be taxed.

Dominguez said the primary jurisdiction to interpret the Tax Code provisions lies with the Bureau of Internal Revenue.

He said the BIR had already issued an opinion to this effect months ago, saying that the situs of income was where the services were rendered.

“Thus, since POGOs are providing services to their counterparts in the Philippines, they are subject to income tax,” Dominguez said. He said the same was true for VAT, which also was imposed on services rendered in the Philippines.

In an opinion given to PAGCOR and the BIR over the weekend, the OSG 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.

Topics: Carlos Dominguez III , Jose Calida , Department of Finance , Salvador Panelo
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