House panel passes POGO bill amidst taxation controversy

The House of Representatives Ways and Means Committee unanimously approved the bill imposing a 5 percent tax on Philippine Offshore Gaming Operators (POGOs) based on gross receipts derived from gaming operations, even as one government official denied their right to do so.

House Bill No. 5267 also subjects foreigners to a 15 percent tax on salaries, annuities, and other emoluments.

“A clear, definitive tax regime for POGOs will be a potent revenue source, as well as a means of placing these facilities under stricter oversight. Failure to faithfully report revenues and expenses will now unequivocally constitute tax evasion,” said the bill’s sponsor, Albay 2nd District Rep. Joey Salceda.

He contends that his bill will increase government revenues by about PHP44 billion ($880 million).

The bill has run, however, into last minute controversy as Solicitor General Jose Calida says that POGOs cannot legitimately be taxed, because test of taxability “is the source, and correspondingly, the source of an income is that activity which produced the income… an offshore-based operator’s income is the placement of bets on its online betting facility, which are derived from sources [outside] the Philippines.”

The Solicitor General’s view was quickly and strongly opposed from a number of other stakeholders.

For example, Senate Minority Leader Franklin Drilon asserted, “The government has the right to tax POGOs, consistent with the position of the economic managers. POGOs owe the government billions in unpaid taxes. The Office of the Solicitor General should leave the matter to the Bureau of Internal Revenue and Department of Finance.”

He added, “The opinion of the Office of the Solicitor General is erroneous, misplaced, and misguided. It does not serve the interest of the country. Who will benefit from it? I do not think that we are prepared to face the consequences that may arise from such an erroneous opinion.”

“It is clear that the whole activity is conducted in the Philippines and, therefore, is subject to the jurisdiction of the Philippines,” Drilon continued, “Because if you say otherwise, then Pagcor would have no authority over them.”