To tax or not to tax: the government evaluates the options on Pogo
MALACAÃANG on Tuesday rejected the opinion of the Office of the Solicitor General (OSG) that the Philippine offshore gambling operators (Pogo) cannot be taxed because he sided with the Department of Finance (DOF) to finally settle the debate once and for all.
Presidential spokesman and chief presidential legal adviser Salvador S. Panelo argued that Pogos, whether domestic or foreign companies, are taxable.
Reacting to the âdifference of opinionâ of the OSG and the DOF, Panelo pointed out that the DOF has the main mandate based on the Administrative Code to formulate, institutionalize and administer tax policies in coordination with other subdivisions, agencies and relevant government bodies.
Socio-Economic Planning Secretary Ernesto M. Pernia, meanwhile, told reporters on Tuesday that he supports Congress efforts to legislate on Pogo taxes which will be similar to franchise taxes.
Albay representative Joey Salceda recently tabled a bill to impose a 5% franchise tax on income generated by Pogos and their service providers.
“Yes, certainly, certainly [support the bill]. It is about 45 billion pesos of tax deductions, tax revenue deductions. It’s not coffee money, âPernia said.
Neda’s Under Secretary for Planning and Policy Rosemarie G. Edillon said imposing taxes on Pogos may also be a way to regulate these businesses.
Edillon said it would help discourage possible excesses in the game.
âIn general, you also use fiscal policy to encourage the good and discourage the bad. So in a way that will help discourage excess, âPernia said.
“For the Pogos which are national companies, they are covered by article 23 [E], Chapter II of the National Tax Code [NIRC] and their income will be subject to Philippine taxes, whether or not it comes from a source outside the Philippines, âPanelo said in a press release on Tuesday.
âAs for the Pogos considered as foreign companies, they are also taxable, but only for the income they have derived from sources inside the country. This is under section 23 [F], chapter II of the NIRC â, he added.
However, he also noted that the OSG opinion was issued in response and was based on statements by an official at the Philippine Amusement and Gaming Corp. (Pagcor), adding that this is subject to change depending on the factual circumstances.
Over the weekend, Solicitor General Jose Calida said that Pogos could not be taxed, as he has been quoted in reports, saying that “the source of income for offshore operators is the placing of bets on their system. online betting derived from sources without the Philippines “.
However, Finance Secretary Carlos Dominguez has reportedly said the Pogos provide services to their Filipino counterparts, subjecting them to income tax.
Despite this, the Palace expressed confidence that the DOF, in conjunction with the Bureau of Internal Revenue (BIR), can competently assess the respective charters and operations of these entities with the aim of subjecting them to Philippine taxes in accordance with the law.
âWhile the issue is studied at length by the DOF, what is clear is that the state cannot be denied its right to collect all taxes applicable to an entity or an individual. This is particularly true with regard to the case of natural persons working in these companies because certainly, their remunerations, wages or salaries for the services they render here are considered as taxable income under Article 23. [A] & [D] of the NIRC, âPanelo said.
The government, he added, has the power to tax and nothing can prevent the administration from doing so.
âIt has been stated by the Supreme Court, in a plethora of cases, that ‘taxes are the cornerstone of the nation through which government agencies continue to operate and with which the state performs its functions for the well-being of its constituents, âPanelo said. âTo defray the expenses of the State, the State has, among its inherent powers, that of taxing. This administration will not be hampered or blocked by technical problems caused by the exploitation of developing technologies in the collection of what is owed to the government.
The House Ways and Means committee on Monday approved for full approval a bill imposing a 25 percent franchise tax on Pogo companies and on their workers an income tax of 25 percent.
Salceda, the panel chair and author of House Bill 5257, said these Pogo taxes would provide 45 billion pesos to the national government.
While Salceda said there are currently 60 Pogo operators in the country, only 10 are registered with BIR.
The Department of Finance (DOF), citing its initial list, said there are some 138,000 foreigners working in the Pogo industry, of which 54,241 have received work permits for foreigners, and a further 83,760 hold special work permits.
The government has also since started its crackdown on delinquent Pogos, with the DOF ordering the BIR to shut down those who fail to retain and pay the appropriate amount of taxes to their employees. With Cai U. Ordinario