Pagcor, gaming firms agree to cut license fees
MANILA, Philippines — The state-run Philippine Amusement & Gaming Corp. has struck a deal with gaming operators to cut license fees by 10-percent of gross gaming revenues to neutralize the burden arising from a controversial judicial ruling that changes the gaming tax regime.
The reduction in license fee as a percentage of gross gaming revenues from both high-roller VIP (very important person) and mass markets was intended to “make whole” the gaming operators after a Supreme Court order that removed Pagcor’s tax exempt status. As a consequence, the tax regime changes for all private licensees as well. Instead of paying the 5 percent franchise tax on gross gaming revenues, they will be be subjected to the 30-percent regular corporate income tax.
To address the game-changing impact of its loss of tax exemption, Pagcor has entered into an agreement with its Entertainment City licensees, namely: tycoon Andrew Tan-led Travellers International Hotel Group, Inc., Enrique Razon Jr.-led Bloomberry Resorts and Hotels, Inc., Macau’s Melco Crown-led MCE Leisure (Philippines) Corp., and Okada-led Tiger Resorts Leisure and Entertainment Inc. on the 10-percent reduction in license fees.
In a disclosure to the Philippine Stock Exchange, Travellers – which also operates Resorts World Manila in Newport City – said this was a “mutually beneficial and practical” solution to address the additional exposure to corporate income tax brought about by Bureau of Internal Revenue (“BIR”) Revenue Memorandum Circular No. 33-2013 (RMC 33-2013).
“Such solution not only preserves for the Philippine government the financial benefits that it already derives from the provisional licenses but also validates Pagcor’s commitment to uphold and abide by the terms of the provisional license,” Travellers said.
The private licencees are one in saying that the 10-percent license fee adjustment was a “temporary measure” to address the unilateral BIR action and was not intended to modify, amend or revise the provisional license/s.
Article continues after this advertisementThe parties agree to revert to the original license fee structure under the provisional licenses in the event the BIR action is permanently restrained, corrected or withdrawn. Pagcor and the licensees also agreed that the 10 percent license fee adjustment is not an admission of the validity of BIR RMC No. 33-2013 and it is not a waiver of any of their remedies against any assessment/s by the BIR for income tax on their gaming revenue.
Article continues after this advertisementFor taxable period prior to April 1, Travellers said the parties agreed to “mutually cooperate to, and in good faith, carry out and accomplish the commercial objectives” of the provisional license in so far as the license fees paid to Pagcor through “equitable arrangements acceptable to the parties.”
Among the gaming operators affected by the BIR ruling, Travellers has had longest operations as Resorts World Manila opened in 2009.
In a separate statement, “City of Dreams” developer and operator Melco Crown welcomed the 10 percent adjustment in license fees.
Clarence Chung, chair and president of Melco Crown Philippines said: “We welcome this initiative and express our sincerest gratitude to the government of the Republic of the Philippines and Pagcor for their continuous support in helping us realize our gaming, leisure and entertainment complex in Manila.”
“The development of City of Dreams Manila is progressing well and we firmly believe our integrated leisure and entertainment destination resort will play a key role in furthering the ambitions of the Philippines in establishing the country as a major leisure and tourism destination in the region,” Chung said.
Travellers said that Pagcor’s Entertainment City project would pave the way for the infusion of at least $5 billion in investments by its licensees, development of at least 3,200 hotel rooms and creation of at least 80,000 direct and indirect employment.
“It is envisioned that the completion of the Entertainment City Project will catapult the Philippines as a must-visit tourist and gaming destination in the Asia-Pacific region,” it said.
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