Game zone
Nothing is in black and white yet but the gaming industry is optimistic it has found the “win-win” framework to preserve the bankability of the Las Vegas-style cluster of integrated entertainment estates now rising in Pagcor City.
Bizbuzz sources privy to the discussions said part of the formula might be for industry regulator Philippine Amusement and Gaming Corp. (Pagcor)—whose loss of tax-exempt status precipitated the game-changing tax concerns—to soften the blow. A source from one licensee said Pagcor might “take a hit to allow the licensees to pay income taxes to the Bureau of Internal Revenue.” As to why Pagcor would agree to this, another licensee said: “The contract speaks for itself.”
We gathered that a big part of the equation would be the potential “migration” of various components of Pagcor City into either the Philippine Economic Zone Authority (Peza) or the Tourism Infrastructure and Enterprise Zone Authority (Tieza) framework. Both provide generous fiscal incentives approximating the investor-friendly original taxation regime assumed by the Pagcor City licensees of 5 percent of gross gaming revenues (in lieu of the 30-percent tax on net income) but would still rely on support from the Bureau of Internal Revenue.
Peza, for instance, gives eco-zone developers and operators an income-tax holiday and the option to pay a special 5-percent gross income tax in lieu of all national and local taxes. For ecozone locators, it gives an income-tax holiday or a four-year exemption from corporate income tax, extendable up to eight years, with the option to pay a special 5-percent tax on gross income in lieu of all national and local taxes after the tax holiday.
The Peza framework may be used for the non-gaming components but for gaming itself, there is a move to bring the Tieza into the loop as well. Doris C. Dumlao
Tieza what?
Compared to Peza, Tieza theoretically can offer an even more attractive fiscal incentive package and tourism being its overarching mandate, proponents deem it could be the more suitable, albeit still untested, zoning framework for gaming.
Under the Tieza framework, new enterprises in greenfield and brownfield tourism zones will, from the start of business operations, be exempt from tax on income for a period of six years. The income tax holiday may even be extended if the enterprise undertakes a substantial expansion or upgrade of its facilities prior to the expiration of the first six years.
Its registered enterprises can be allowed to carry over some net operating losses as a deduction from their gross income for a given number of years.
Except real estate taxes and such fees as may be imposed by the Tieza, a new enterprise will be exempt from payment of all national and local taxes and license fees, imposts and assessments. Instead, the enterprise will pay a tax of 5-percent on its gross income earned, divided equally to the following: the affected cities or municipalities, the national government and Tieza.
We asked Tieza general manager Mark Lapid whether this was a viable option for Pagcor City and this was his reply: “We are here to support any development project that will attract tourists into the counter. We will definitely look into any application by Pagcor City to be designated as a tourism ecozone and will grant them the tax incentives provided for by law as soon as the BIR (Bureau of Internal Revenue) has issued the revenue regulations for this.”
The operative party here, however, is the BIR. We hear that the reason why Tieza is still untested is none of its few registrants has been able to actually use the incentives to date. That is because it is never easy to convince the BIR to issue the revenue regulations that will make those incentives a reality. Doris C. Dumlao
Belle ‘conglomerate’
Belle Corp., the developer of Tagaytay Highlands and part of the group that is building a $1.2-billion hotel-casino complex in the Entertainment City, may undergo a restructuring or “asset realignment” like that done by other SM Group companies, its vice chair says.
Belle will not be part of the SMDC-SM Prime merger, so the plan now is to turn the gaming-and-leisure firm into a “conglomerate” that will have three major legs. One will be the gaming business, which will be supported by two other major business arms.
Meanwhile, Pacific Online Systems Corp.—which provides lotto equipment services to PCSO and receives lease payments in return—says lotto games are expected to remain popular with sales hitting P13 billion this year. Apparently, its popularity is driven not by big-time payouts but by sales for smaller games. Miguel Camus
More power
AFTER consolidating the automotive and power generation businesses into GT Capital Holdings, the group of taipan George Ty is nearly done with the group-wide restructuring. However, GT Capital still reserves the option of further increasing its stake in power business Global Business Power Corp. where it now has a 51-percent stake.
To date, 49 percent of the power business is still held by First Metro Investment Corp., the investment banking unit of Metropolitan Bank and Trust Co. “We need not buy the whole amount but we’re looking at that. It’s being considered but we haven’t decided what to do with it,” GT Capital president Carmelo Bautista said. For now, Bautista said there was no urgency. “It’s making money for the bank anyway.” Doris C. Dumlao
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