Tax on lotto prizes, casino fee pushed

THE GOVERNMENT’S tax research arm is supporting moves to slap taxes on lotto winnings as well as charge fees for entering casinos.

In a report titled “Profile and Taxation of Selected Gambling and Betting Activities in the Philippines,” the Department of Finance-attached National Tax Research Center (NTRC) said there was an “unequal tax treatment of casinos, lotteries and horse racing activities wherein horse racing clubs and bettors are saddled with more taxes.”

The report noted that horse racing clubs are slapped corporate income tax, franchise tax and value-added tax, as well as a tax on the prize of winning race horses under the National Internal Revenue Code of 1997, as amended, or the Tax Code.

In contrast, the Philippine Charity Sweepstakes Office (PCSO), which operates sweepstakes and lotto, does not pay any tax; the Philippine Amusement and Gaming Corp. (Pagcor) and its licensed casinos, meanwhile, do not pay percentage tax on winnings.

Horse racing bettors and winners are also levied documentary stamp tax (DST) as well as percentage tax for winnings, whereas those who play in casinos only pay a final withholding tax on prizes over P10,000, while those that place their bets in sweepstakes and lottery only pay DST.

“There seems to be unfair tax treatment between industry players in the identified gambling and betting activities. However, it is believed that the PCSO and Pagcor are not heavily taxed due to their numerous mandatory contributions to the government that trickle down to the benefits of the Filipinos through economic and/or health assistance,” the report read.

It quoted an official of regulator Philippine Racing Commission or PhilRaCom as claiming that “horse racing in the country generates low gross sales because of high taxes.”

Hence, the NTRC said it supports the pending bills in Congress aimed at addressing such unequal tax treatment.

“The proposal to charge an entrance fee in Philippine casinos amounting to P3,500 is supported since it would only be collected from those who have the financial capacity to splurge some money in the casinos,” the NTRC said. House Bill (HB) No. 4859 sponsored by Misamis Oriental Rep. Peter M. Onabia Sr. seeks to charge an entrance fee from all Filipinos who want to play in casinos.

“Under Section 14(3)(b) of PD (Presidential Decree) 1869, Filipino residents with gross income of at least P50,000 in the previous year, as certified by the BIR (Bureau of Internal Revenue), are allowed to play in casinos. However, the said provision is neither observed nor imposed. Thus, [HB 4859] aims to discourage Filipinos from playing in casinos,” the NTRC noted.

Also, the NTRC said it likewise supports the proposed 20-percent final tax on lotto winnings “for equity reasons, considering that other forms of winnings are subject to the tax.”

HBs 4742 and 4774 seek to impose such tax, which the NTRC said is “justifiable as it [lottery] is the only gambling/betting activity in country which is not subject to the tax on winnings.”

“Moreover, the winnings from lotto, or any other form of gambling or game of chance, are money that may be considered to be ‘easily earned’,” the NTRC pointed out.

The report nonetheless said “some refinements may be made on the proposed bills as to specify the amount of PCSO winnings that will be subject to the proposed 20-percent final tax,” citing that a blanket application of such tax “may be construed that even minor prizes will be subject to the proposed tax on lotto winnings,” the NTRC explained.