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Senate bill eyes more defined POGO taxation guidelines

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MANILA – A proposed legislation in the Senate is seeking to plug holes in revenue laws to allow the government to better collect taxes from Philippine Offshore Gaming Operators (POGOs).

In her sponsorship speech for Senate Bill No. 2232 (An Act Taxing Philippine Offshore Gaming Operations), Senator Pia Cayetano said the changes can generate additional revenues that can exceed the PHP7.18 billion collected by the Bureau of Internal Revenue (BIR) from POGOs last year.

Cayetano said the 2020 collection is 11.71 percent higher than the PHP6.42 billion 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,” Cayetano said of the proposal prepared by the Ways and Means committee, which she chairs, and co-authored by Senators Ralph Recto and Imee Marcos.

Cayetano said the government could have collected more than PHP38 billion in 2019 alone.

“The reason for this is because at present, nowhere under the National Internal Revenue Code can we find explicit tax provisions pertaining to offshore gaming licensees, including gaming operators, gaming agents, and service providers,” she said.

POGOs’ regulation and taxation started when the Philippine Amusement and Gaming Corporation provided the rules and regulations on September 1, 2016.

It was followed by a BIR Memorandum Circular in December 2017 that states the “entire gross gaming receipts/earnings or the agreed or pre-determined minimum monthly revenues/income from Gaming Operations under existing rules, whichever is higher, shall be subject to a franchise tax of five percent (5 percent), in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description.”

Republic Act 11494, or the Bayanihan to Recover as One Act (Bayanihan 2), mandated that POGOs pay a 5 percent franchise tax on gross bets or turnovers.

The Supreme Court, however, issued a recent temporary restraining order on the said provisions of Bayanihan 2, together with the other BIR revenue regulations and circulars concerning POGOs, in January.

The bill now seeks to address a number of lingering issues on POGO taxation, particularly the taxability of POGO licensees that claim they are not required to register and pay taxes to the BIR since they derive income from sources not within the Philippines.

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

The gaming tax will be in lieu of all taxes.

Aliens employed by offshore gaming licensees and service providers will be subject to the 25 percent withholding tax, considering they are not engaged in trade or business within the Philippines.

Under the bill, the 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.

The misdeclaration on the actual monthly salary of foreign nationals working in the POGO industry is also addressed by the bill by providing a minimum final withholding tax due of PHP12,500 for any taxable month.

By Benjamin Pulta

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