MANILA - Philippine offshore gaming operators (POGOs) need to pay the 5-percent franchise tax before being allowed to resume operations, the country’s main tax collection agency said contradicting the position of the state gaming regulator and the Office of the Solicitor General (OSG).

The Bureau of Internal Revenue (BIR) said the franchise tax has been in effect since 2017 and “is not a new imposition nor is it being imposed retroactively,” contrary to what the Phlippine Amusement and Gaming Corp (PAGCOR) has said.

PAGCOR has insisted that the 5 percent franchise tax was not previously imposed by the BIR, citing an opinion issued by Solicitor General Jose Calida in Dec. 19, 2018.

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However, in a statement released by the Department of Finance on Monday, BIR Commissioner Caesar Dulay cited the tax agency’s own regulations governing POGOs.

Dulay said the BIR’s Revenue Memorandum Circular issued in Dec. 2017 states that the entire gross gaming receipts or earnings of POGOs is subject to a franchise tax of 5 percent “in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or description.”

The BIR chief said that on April 26 last year, he already sent a letter to the OSG reiterating the BIR’s stand, and pointed out that the legal opinion issued by the OSG on the issue “is not binding.”

He said that under Section 4 of the National Internal Revenue Code "the power to interpret provisions of the Tax Code and other tax laws shall be under the exclusive and original jurisdiction of the BIR Commissioner subject to review by the Secretary of Finance.”

The BIR has said that it collected some P6.4 billion in taxes from POGOs in 2019, but this was only around 13 percent of the P50 billion the government expects to collect from the Chinese-run gambling firms.

Dulay also dismissed claims that POGO operators pay corporate income taxes and value added tax (VAT). He said the BIR’s regulations on POGOs clearly states they are only subject to the franchise tax, and only POGO service providers are subject to the regular taxes, such as income and VAT.

"However, both POGO operators and service providers whose employees earn compensation income need to withhold and remit the taxes due from them,” Dulay said.

Earlier this month, POGO operators were reportedly leaving the Philippines because of the country’s tax demands and the scrutiny their operations were getting. But a Malacanang official said only 1 POGO hub had so far closed as authorities seek their full tax compliance.

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