Pogo tax regime bill reaches Senate plenary

FILE PHOTO

MANILA, Philippines — A bill seeking to establish the tax regime covering Philippine offshore gaming operators (Pogos) reached the Senate plenary on Tuesday.

Senator Pia Cayetano, the chairperson of the Senate ways and means committee, endorsed for plenary approval Senate Bill No. 2232, which seeks to amend the National Internal Revenue Code (NIRC).

The measure is contained under Committee Report No. 262, which is signed by 14 senators.

“These online gaming facilities have become a growing industry in the Philippines, generating additional revenues for the national government in the past year,” Cayetano said in her sponsorship speech.

She cited data from the Bureau of Internal Revenue (BIR) which showed that Pogo collections amounted to P7.18 billion in 2020.

This, according to Cayetano, is 11.71 percent higher than the P6.42 billion collected from the same industry in 2019.

“But considering the proliferation of Pogos in the country in recent years, the potential of this industry as a source of revenue for the government could have been much bigger,” the senator, however, pointed out.

“In fact, during our hearing, it was estimated that the government could have collected more than P38 billion in 2019 alone, a far cry from the actual collection of the BIR,” she added.

She attributed this to the lack of explicit tax provisions pertaining to offshore gaming licensees, including gaming operators, gaming agents, and service providers under the NIRC.

“The long-standing questions about the tax obligations of Pogos conducting business in our country remain unanswered and unaddressed, which means billions worth of revenue losses for our government,” Cayetano said.

According to Cayetano, legislating the tax regime of the Pogos and incorporating the same to the NIRC is “a step towards the right direction.”

“It will not only plug the loopholes in our country’s tax code that led to issues of confusion surrounding the operation of Pogos, but it will also prevent similar issues in the future, which could gravely undermine our government’s power to impose and collect the right taxes,” she added.

“By addressing these gaps in our tax system, we can maximize the Pogo industry’s potential as a revenue source,” she further said.

Cayetano said that under the bill, all offshore gaming licensees, regardless of whether Philippine or foreign-based are considered doing business in the Philippines, must pay 5 percent gaming tax on the gross gaming revenue or receipts derived from their gaming operations.

“This gaming tax will be in lieu of all taxes,” she noted.

Meanwhile, income generated from non-gaming activities shall be subject to the lower Corporate Income Tax rate, as provided under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

For foreigners employed by offshore gaming licensees and service providers, they will be subject to a 25-percent withholding tax rate under the bill, according to Cayetano.

“The practice of most Pogo entities to withhold and remit Withholding Tax on Compensation based on Section 24 of the NIRC, or the graduated income tax rates, instead of the 25 percent Final Withholding Tax will be corrected,” she noted.

“As clearly stated in the bill, 25 percent final withholding tax based on gross income will be imposed on an alien individual, regardless of residency in the Philippines, term, and type of visa,” she added.

Cayetano said the bill will also address the “pervasive misdeclaration” on the actual monthly salary of foreign nationals working in the Pogo industry.

The measure, she noted, provides a minimum final withholding tax due of P12,500.00 for any taxable month from the said worker.

Under the bill, taxes due from offshore gaming licenses “should be directly remitted to the Bureau of Internal Revenue, as the agency mandated by law to collect the same,” the senator added.

Meanwhile, the Philippine Amusement and Gaming Corporation and investment promotion agencies are required to

employ a third-party audit platform in order to ensure the proper taxes are due.

“In addition, periodic reports of the third party audit platforms should be submitted to the BIR for verification,” Cayetano said.

The House of Representatives approved its version of the measure last February.

/MUF