Lawmakers say SC ruling affirms Pogo tax obligations
INQUIRER FILE PHOTO
MANILA, Philippines — Lawmakers on Friday brushed aside the Supreme Court ruling that the tax impositions by the Bayanihan 2 law on Philippine offshore gaming operators (Pogos) was unconstitutional.
“This is moot and academic already as there is a new law … that governs the tax regime for Pogos,” Sen. Sherwin Gatchalian told the Inquirer.
Gatchalian, chair of the Senate ways and means committee, was referring to Republic Act No. 11590, enacted in September 2021 to impose taxes on Chinese-run Pogos.
Sen. Juan Edgardo Angara, Senate finance committee chair, noted that the new law mandated the specific tax obligations of Pogos to the government.
The Supreme Court said that foreign-based Pogos don’t have to pay a 5-percent franchise tax under the Bayanihan 2 law passed in September 2020 and intended mainly to deal with the COVID-19 pandemic, but they were obligated to pay all taxes under RA 11590.
“All in all, before the enactment of RA 11590, there is no valid law which imposes taxes upon Pogos, including offshore-based Pogo licensees,” the Supreme Court said in a decision dated Dec. 21, 2021 that was published on its website only last week.
“Thus, Pogos, including offshore-based Pogo licensees, such as the petitioners, cannot be made liable for taxes prior to the enactment and effectivity of RA 11590,” the court said. It emphasized, however, that the 2021 law “cannot be applied retroactively.”
The court consolidated and voted 12-2 in favor of two petitions—one by Saint Wealth Ltd. and another by 14 others led by Marco Polo Enterprises Ltd.—challenging the legality of the tax impositions by the Bureau of Internal Revenue (BIR) and the Department of Finance (DOF) under Bayanihan 2.
“The imposition of new taxes, camouflaged as part of a long list of existing taxes, cannot be contemplated as an integral part of a temporary COVID-19 relief measure. Invariably, 11 (f) and (g) of the Bayanihan 2 law are unconstitutional insofar as it imposes new taxes on Pogo licensees,” the Supreme Court said.
“We respect the decision of the Supreme Court,” said Senate President Juan Miguel Zubiri. “We, however, reiterate our call for the government to take a hard look at our Pogo policy.”
“We have to undertake an in-depth review of the pros and cons of allowing Pogos to operate in our country in light of the recent spate of abduction cases and other established negative social costs,” Zubiri said.
He and other senators support calls urging the Marcos administration to permanently shut down Pogos following reports of serious crimes, such as kidnappings and human trafficking that involved Chinese nationals engaged in these offshore gambling operations. (See related story on this page)
Sen. Risa Hontiveros said the high court’s decision practically “removed the last remaining justification for Pogos—the revenue contribution to our national coffers.”
“With the revenue from ancillary services debatable at best, and the real estate benefits negated by adverse impacts to the Filipino housing market, I don’t see any further reason why Pogos should not be banned from our shores,” Hontiveros said.
But House ways and means panel chair Rep. Joey Salceda said the government was collecting large revenues from Pogos, especially under the Pogo tax law which he had authored.
Citing data from the BIR, he said revenues from Pogo taxes from January 2021 to October 2021, before the implementation of RA 11590, amounted to P300 million a month.
After its implementation, the tax collection jumped to P410 million monthly for the rest of year and by January 2022, it rose to 540 million.
“So, that closes any question on whether the tax law worked. It worked,” Salceda said.
Intensified campaign
Data from the DOF show that an intensified campaign against errant Pogos and their service providers yielded P6.42 billion in taxes in 2019.
This was P4.04 billion, or 169 percent, more than the P2.38 billion collected from these gaming companies in 2018.
This surge in tax take was the result of a sustained campaign spearheaded by then Finance Secretary Carlos Dominguez III to crack down on errant Pogos and their service providers that have eschewed tax payments, including the income taxes that the government should have collected from foreign nationals working for these companies.
It was unclear whether tax payments made by the foreign-based Pogos under the Bayanihan 2 law would be refunded following the Supreme Court’s decision. BIR officials were unavailable for comment.
Salceda believes that the high court’s ruling resolved the constitutionality of RA 11590 and “rendered the petitions moot.”
“RA 11590, which the Supreme Court has now affirmed, is the most brutal tax law, in terms of tax administration, in the country’s Tax Code. It presumes income for employees—so there is no escaping tax,” Salceda said.
Former Senate President Vicente Sotto III said the tribunal’s decision was “very disappointing” and “does not speak well of our country.”
“When a country and its people need healing, laws are sometimes allowed resilience!” Sotto said in a Viber message to reporters.
“That law was conceived and passed during the height of the pandemic. We gave due considerations to that and I wish the judiciary gave it the same concern,” Sotto added.
Salceda opposed moves to shut down Pogos entirely, saying the government should enforce the law and only go after illegal gaming operators.
“I need to know what social harm the legal and compliant Pogos have caused. Tell me. Because even the Philippine Amusement and Gaming Corp. (Pagcor) says that those associated with crime are not legal operators,” he said.
Salceda warned that closing down even legal Pogos would “only incentivize the underground Pogos.”
“That’s like closing down whole ecozones just because there is some smuggling in them,” he said. “Don’t burn down the whole house just to kill the rat. Especially when, judging from Pagcor itself, the rat seems to be outside the house anyway.” —WITH A REPORT FROM RONNEL W. DOMINGO INQ
