SC upholds tax perks of Pagcor

The Supreme Court building INQUIRER FILE PHOTO

MANILA, Philippines—The Supreme Court has ordered the Bureau of Internal Revenue (BIR) to stop collecting corporate income tax from the Philippine Amusement and Gaming Corp.’s (Pagcor) operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and other related activities.

In a 14-page decision released recently, the court en banc ordered the BIR to cease and desist from implementing a 2013 memorandum circular that imposed corporate income tax on Pagcor’s income derived from its gaming operations as well as franchise tax on income from other related services.

The BIR issued its circular after the Supreme Court, in 2011, ruled as valid an amendment to the National Internal Revenue Code that listed several entities exempt from paying corporate income tax. The list did not include Pagcor so the BIR began assessing Pagcor for income and franchise taxes, thus prompting the state-owned company to file a motion for clarification before the high court in September 2013.

In its new ruling, the high court said the amendment of the code, made though Republic Act No. 9337, did not also amend Pagcor’s charter, which provided that income from gaming operations was subject only the 5-percent franchise tax while its income from operation of other related services was subject to income tax only.

The 5-percent franchise tax being collected by the BIR was not applicable to Pagcor’s income from other related services, the court’s decision, written by Justice Diosdado Peralta, stated.

“[I]t would be the height of injustice to impose franchise tax upon petitioner for its income from other related services without basis,” the decision added.