MANILA, Philippines — Despite an exodus of Philippine offshore gaming operators (Pogos) trying to avoid not only their tax payments but also the surging coronavirus disease 2019 (COVID-19) infections here, the Bureau of Internal Revenue (BIR) is running after their taxes due to shore up funds for COVID-19 response.
On Saturday, the BIR published Revenue Regulations (RR) No. 30-2020, which contained the guidelines in collecting the taxes from Pogos and other gaming industry players under Republic Act (RA) No. 11494 or the Bayanihan to Recover as One Act.
To recall, the Bayanihan 2 Law included taxes derived from gaming as well as non-gaming operations among the sources of funding to fight the health and socioeconomic crises inflicted by COVID-19.
As such, RR 30-2020 signed by Finance Secretary Carlos Dominguez III and Internal Revenue Commissioner Caesar Dulay reiterated that gaming firms needed to shell out the 5 percent franchise tax slapped on gross bets or turnovers, or the agreed pre-determined minimum monthly revenues from gaming operations, whichever was higher.
The franchise tax covers offshore gaming licensees and their operators, agents, service providers, as well as support providers.
On top of the taxes generated from their earnings, the gaming sector must also remit their workers’ income taxes on top of value-added tax (VAT) and other levies imposed on their income coming from non-gaming operations, RR 30-2020 said.
The BIR guidelines hence tasked the state-run regulator Philippine Amusement and Gaming Corp. (Pagcor) as well as investment promotion agencies (IPAs) that issue offshore gaming licenses to furnish the taxman with the following information: gross bets or turnovers earned by industry players; minimum guarantee fee or the minimum amount of regulatory fees they paid; and list of licensees, accredited service providers, and number of foreign workers, among other relevant information.
As such, the IPAs that operate the economic zones in the provinces of Aurora, Bataan, and Cagayan, as well as Clark and Subic freeport zones were covered by these BIR rules.
The BIR warned that “non-payment, underpayment and/or payment of taxes computed not in accordance with the prevailing official exchange rate at the time of payment by offshore gaming licensees, operators, agents, service providers and support providers shall be considered as fraudulent acts and subject to incremental penalties” under the Tax Code.
Also, “the BIR shall implement closure orders against [gaming industry players] that fail to pay the taxes due and/or committed any of the fraudulent acts, and such erring entities shall cease to operate,” RR 30-2020 said.
“The implementation of closure orders against operators, licensees or agents shall necessarily include the closure of all their respective accredited service providers, which must also cease to operate,” RR 30-2020 added.
The latest Pagcor data showed that as of September, the number of Pogo licensees dropped to 55 from 60 at the start of the year.
But as of Sept. 29, only 33 of these Pagcor-licensed Pogos had been issued with authority to resume operations.
To recall, the BIR in May issued rules mandating Pogos and service providers to first pay their tax dues before they can resume operations as the government gradually eased the COVID-19 lockdown, besides observing mandatory health standards.
As of Sept. 29, 111 accredited local gaming agents and service providers were also already allowed to resume operations.
Licensees hire Philippine-based service providers whose employees directly deal with their clients — online gamblers abroad, mainly in China, where gambling is illegal.
Early this year, there were up to 218 service providers employing about 130,000 to 150,000 people, of which about three-fourths were foreigners — mostly Chinese.
Pagcor and IPAs such as the Subic Bay Metropolitan Authority (SBMA) recently announced that a number of Pogos exited from the Philippines due to issues on their taxation and dwindling business.
Even as Pogos fled the Philippines, Dominguez said in September that all their taxes must be settled first as they will be audited by the BIR for clearance before closure.
Last year, the government collected P6.42 billion in taxes from errant Pogos or 169 percent more than the collections in 2018.