SC upholds original tax scheme for gaming firms

The Supreme Court has issued a new ruling that upheld the original tax regime promised to gaming firms when they were licensed by state-owned Philippine Amusement & Gaming Corp. to build massive integrated gaming resorts meant to boost the local tourism industry.

In a disclosure to the Philippine Stock Exchange Tuesday, Bloomberry Resorts Corp. said the SC had granted the certiorari petition of its unit Bloomberry Resorts & Hotels Inc. (BRHI) against the imposition by the Bureau of Internal Revenue of the 30 percent corporate income tax on BRHI as a licensed casino operator of Pagcor.  The BIR was ordered to cease and desist from imposing corporate income tax on income from gaming operations of casinos duly licensed by Pagcor.

The SC’s decision allows all private licensees to be subjected to 5 percent franchise tax on gross gaming revenue instead of being burdened by the regular 30-percent corporate income tax as what the BIR had intended.

The Philippine gaming industry has long been seeking a lasting solution to what had turned out to be a volatile tax regime for them.

BRHI, the casino operator at Solaire Resort & Casino, filed the certiorari petition in 2014 to nullify the provision of Revenue Memorandum Circular (RMC) No. 33-1013 issued in 2013 by then Revenue Commissioner Kim Henares that imposed corporate income tax on casinos.

A petition for writ of certiorari is a document that a losing party files with the Supreme Court seeking a review of the decision of a lower court.

To recall, the BIR ruling created jitters on the gaming industry as investors like Bloomberry had come in on the assumption of a competitive cost structure versus regional gaming hubs.

In a decision dated Aug. 10, the high court affirmed BRHI’s argument that as contracting party of Pagcor, it was subject only to the 5 percent franchise tax on its gross gaming revenue, in lieu of all taxes, as provided under Section 13(2) of the Pagcor Charter (Presidential Decree No. 1869).

“This Supreme Court decision will allow Pagcor and BRHI as an integrated casino resort to revert to the original license fee structure of 15 percent and 25 percent license fee (inclusive of the 5 percent franchise tax) for high rollers/junket and mass gaming respectively,” the disclosure said.

To neutralize the impact of the controversial BIR ruling, Pagcor came out with an interim solution cutting the gaming operators’ license fees by 10 percent of gross gaming revenues. From the start, however, gaming operators said such license fee adjustment was a “temporary measure” to address the unilateral BIR action and was not intended to modify, amend or revise the provisional licenses.

The new Pagcor chief, Andrea Domingo, earlier said Pagcor would remove the gaming tax relief.  A gaming industry expert said that would have been a nightmare for gaming firms since they would be subjected to both full gaming taxes plus the regular corporate income tax.