The Department of Finance (DOF) on Monday, Nov. 18, countered an opinion by the Office of the Solicitor General (OSG) saying online casinos, or Philippine Offshore Gaming Operations (Pogos), cannot be taxed by the Philippine government.
Finance Secretary Carlos Dominguez III, in a message to reporters through Viber, said Pogos must pay corporate income taxes and their workers’ personal income taxes.
Dominguez made the comments on the same day that the OSG was quoted as saying Pogos cannot be taxed by the Philippine government.
The finance chief said it was not the OSG’s role to interpret tax laws because it was the “primary jurisdiction” of the Bureau of Internal Revenue (BIR).
“The BIR issued an opinion to this effect months ago saying that the situs of income is where the services are rendered,” Dominguez said.
“Thus, since Pogos are providing services to their counterparts in the Philippines, they are subject to income tax,” Dominguez said.
“The same is true for value-added tax (VAT), which is also imposed on services rendered in the Philippines,” Dominguez added.
As early as 2017, the BIR already issued Revenue Memorandum Circular (RMC) No. 102-2017 that slapped a number of taxes on Pogos licensed by the Philippine Amusement and Gaming Corp. (Pagcor) in a bid to keep the government from losing revenue from the online casinos.
Internal Revenue Commissioner Caesar R. Dulay subsequently issued RMC 78-2018 in 2018, a set of “special rules” on Pogo registration with the BIR before they can renew their Pagcor licenses.
RMC 102-2017 requires Pogos to pay franchise tax of 5 percent on gaming income “in lieu” of other taxes.
Income from gaming operations come from casinos, gaming clubs and other similar amusement or recreation places, as well as gaming pools.
A Pogo’s income from other related services would be subject to “normal income tax, value-added tax and other applicable taxes.”
Other related services include entertainment and shows in gaming facilities.
Gaming agents representing Pogos, service providers and BPOs would also be taxed 5 percent and also subjected to other normal tax rates.
The BIR added that salaries paid out to Pogo workers are subject to withholding taxes that should be remitted to the revenue office.
Equipment and other goods for Pogo use are also subject to existing taxes, the BIR added.
It said the BIR is “not a newcomer to the workings and tax issues presented by online business transactions through the internet.”
“The challenge in gaming operations is how to implement a fair and equitable taxation of online gaming businesses,” the BIR said.
It was also important to monitor revenue and other non-revenue earnings of Pogos, the bureau added.
“This is the perspective from which the current issue of taxing taxpayers engaged in Pogo should be viewed,” it said./Edited by TSB