BIR duns Pagcor for P6.8 B in taxes
By Michelle Remo
Philippine Daily Inquirer
First Posted 05:05:00 08/08/2008
MANILA, Philippines—Unwilling to pay income and value-added taxes, the Philippine Amusement and Gaming Corp. (Pagcor) owes the Bureau of Internal Revenue P6.8 billion as of end-2007.
Of the total, P1.8 billion was for income tax payments and P5 billion for the VAT.
This according to the BIR, which has been engaged in a tax battle with Pagcor the last three years over the gaming firm’s liabilities.
For its part, Pagcor has maintained it is not subject to the 32-percent corporate income tax and the 12-percent VAT under its charter.
Issue before SC
“Since time immemorial, Pagcor has been exempt from these taxes as stated in our charter. We don’t know why all of a sudden they want us to pay VAT and income tax,” said Dodie King, Pagcor vice president for corporate communications.
But the BIR and its mother agency, the Department of Finance, have insisted Pagcor is no longer exempt from having to pay income and VAT taxes after the Reformed Value-Added Tax Law went into effect in 2005.
The Supreme Court is hearing a case on the issue. Both parties, the DOF-BIR and Pagcor, earlier petitioned the high tribunal to immediately resolve the impasse.
Finance Undersecretary Gil Beltran said a compromise between the DOF-BIR and Pagcor appeared unlikely.
“It is difficult to have a compromise because their positions are too opposed,” said Beltran in an interview.
Underdeclaring
In a position paper it submitted to the Senate committee on ways and means, the DOF said Pagcor was not only failing to pay income and VAT taxes, but was underdeclaring its income, on which the five-percent franchise tax is based.
Pagcor has continued to pay the franchise tax.
The DOF, citing a study by the National Tax Research Center, said Pagcor declared only 80 percent [P19.4 billion] of its income as taxable in 2006, this from its core gaming operation.
“Non-gaming revenues of Pagcor are not included in the 5-percent franchise tax. The non-gaming revenue refer to Pagcor’s share in the winnings of its licensees, from slot machines that are on demo, bingo, chip washing, Internet gaming and licensing of privately operated casinos [that received their franchises from Pagcor],” the DOF said.
The Senate committee opened an inquiry into Pagcor’s tax compliance following reports from the BIR and DOF that the national government has been losing huge potential revenue with the nonpayment by the gaming firm of corporate income and VAT taxes.
“Pagcor informed us that if it paid taxes to the national government following the DOF-BIR position, it would no longer be able to remit any cash contributions to President Gloria Macapagal-Arroyo’s social fund…” the DOF said in the position paper.
The DOF said that, notwithstanding its contributions to the President’s fund, Pagcor should still meet its tax obligations.
But King said Thursday that making Pagcor pay income and VAT taxes would only move its revenues from one government pocket to another.
He explained that currently 50 percent of Pagcor’s income went to the National Treasury, another five percent to the BIR in franchise tax, while the rest went to fund various social services of the government.
He said the only difference that these taxes would make is that the BIR will look good in terms of tax collection.
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