Ex-mayor calls for review of rules on STL franchises

A partymate of President Rodrigo Duterte on Sunday described as unfair the right of Small Town Lottery (STL) operators to match the bid offered by aspiring players for the franchise of the state-sanctioned numbers game.

Former Mayor Roderick Umali of Tiaong, Quezon province, urged Justice Secretary Vitaliano Aguirre II to review the “right to match” privilege given to existing STL operators under the implementing rules and regulations approved by the Philippine Charity Sweepstakes Office (PCSO) board.

“The ‘right to match’ privilege means that the current STL operators could win the bidding if they match the highest bid of the new players. It’s that simple. I think it’s unfair,” Umali told the Inquirer.

He said the reforms implemented to fix the STL benefited only existing gaming operators, who have been found to have billions of pesos in unpaid taxes.

Third front

Mr. Duterte designated Aguirre to head the multiagency task force created to introduce institutional changes in STL in an effort to stamp out illegal gambling, the third front in the President’s war against criminality.

The Arroyo administration reintroduced STL in 2006 to stem underground lottery, but was conveniently used by gambling syndicates as a smokescreen for similar illegal numbers game, such as “jueteng,” two-ball and “masiao.”

Similar mechanics

In STL and jueteng, bettors choose two-number combinations. Bets in jueteng involve a pair of numbers from 1 to 37. In STL, the choices are from 1 to 40.

Unlike the PCSO-run lotto, where draws are televised nationwide, STL draws are done locally.

Because the two games had similar mechanics, STL was used as a front by jueteng operators.

Sought for comment, Aguirre said the concerns of Umali and other other applicants of STL franchises had already been addressed by the PCSO chair, Jose Jorge Corpuz, and its general manager, Alexander Balutan.

Contrary to Umali’s claim, he said the reforms in the STL operations would ensure a level playing field for all interested gaming firms and increase the PCSO’s income.

“Besides, the right to match privilege is just 50 percent of the criteria for awarding an STL franchise. The applicants are also chosen according to their ability to provide employment and financial capability,” Aguirre said in a mobile phone interview.

In fact, he said at least four of the 18 current STL operators lost the bidding despite enjoying the right to match privilege.

With the reforms being implemented, the justice secretary said the PCSO could generate as much as P30 billion a year from STL operations, which would be used to fund Mr. Duterte’s health programs for the poor.

Cash bond

He said the “presumptive monthly retail receipts” or the projected minimum monthly income, which would be collected from the gaming companies as cash bond, would protect the PCSO from unscrupulous STL franchise owners who underreported their collections.

Corpuz said he would be in Malacañang on Tuesday to discuss and launch the PCSO program for STL.

“All the questions will be answered in Malacañang,” he said.

Corpuz said his office “will soon announce the winners” of the bidding for STL franchises.

He said the PCSO board evaluated between Oct. 1 last year and Jan. 10 this year, a total of 224 corporations that applied for a franchise.

“It took that long to evaluate all the records, so the right to match is done already,” he said.

From the initial 18, there are now 56 corporations that will operate STL,” the PCSO chair said.

“Umali did not take part [in the bidding.] So, it’s not my fault,” he added.

Umali, who lost the May 2016 elections as member of the President’s PDP-Laban party, said the projected minimum monthly income, which would be collected from the gaming companies as cash bond, provided an undue advantage to firms previously given STL franchises.

He pointed out that Aguirre and the National Bureau of Investigation had mentioned that STL franchise owners did not pay as much as 90 percent of their taxes.

Said Umali: “These companies were able to run away with billions of pesos in unpaid taxes. They should have been punished and disqualified outright because of their background.”

Besides allegedly using STL as a front for jueteng, operators have been suspected of shortchanging the government by underreporting their daily bet collections and their refusal to pay documentary stamp tax.

“If the current STL operators want to join the bidding process, they should pay their tax liabilities first. All operators who want to run the STL should have a clean record,” Umali said.

He cited the case of Ramloid Gaming Corp., the licensed STL operator in Laguna whose owner, incumbent Tiaong Mayor Ramon Preza, beat Umali in the mayoral race.

“But this is not about politics because the elections are over,” said Umali. “I just want to help the government in cleaning up the STL operations.”

DST settled

Corpuz said he did not know whether the BIR was running after Ramloid. “But when it comes to the PCSO, we already settle the taxes,” he said.

Corpuz said the PCSO had started paying documentary stamp taxes (DST) that were not remitted to the BIR.

In 2015, a BIR representative said that STL operators had not paid a single centavo in documentary stamp tax since the STL was established in 2006.

The BIR won a Supreme Court ruling in 2008 that the STL is covered by a National Internal Revenue Code provision that imposes a 10-centavo documentary stamp tax for every P1 bet in jai alai, horse race, lotto, or other authorized numbers games.

But the PCSO ignored the ruling.

Corpuz said the PCSO is set to settle the P3.81 billion in back taxes (cut down from the original P13.6 billion) that it incurred from 2006 to 2014 for the 10-percent stamp tax document.

It paid P1.05 billion last October and P490 million in November.

The PCSO was expected to settle the remaining P1.34 billion last Dec. 31 and another P1 billion by June 30, 2017.

‘More reforms’

Corpuz said the recent reforms in the PCSO had resulted in aggressive expansion of financial assistance and increase in monthly revenues from 100 to 150 percent.

Since 2006, there are only 18 corporations running the STL and they have earned P4.7 billion in revenues.

“How much more if you expand the market to more than 50 corporations?” he said.

Corpuz cited, for instance, that the P43 million in presumptive monthly retail receipt in September last year was increased to P113 million in October in one location.

“This is the reason why we are very positive we are able to generate more charity funds going to the poorest of the poor. We increase the daily allocation for financial medical assistance,” he said in an earlier interview.