BIR temporarily shuts unregistered Pogo, service provider in Makati City

The Bureau of Internal Revenue main office in Quezon City. (File photo from Philippine Daily Inquirer)

MANILA, Philippines — The Bureau of Internal Revenue (BIR) on Wednesday temporarily closed down a licensed Philippine offshore gaming operator (Pogo) and its service provider in Makati City, which the taxman found have been unregistered as taxpayers.

The BIR said in a statement the Pogo licensee Imperial Choice Ltd. failed to register under Section 236 of the Tax Code as well as Republic Act (RA) No. 11590 signed by President Rodrigo Duterte in September 2021, or the so-called “Pogo Tax Law.”

Imperial’s accredited service provider Aplus Accel Inc. was also closed down as a result of its principal’s unregistered status.

Pogos licensed by the state-run Philippine Amusement and Gaming Corp. (Pagcor) employed service providers, whose workers directly dealt with their clients — online gamblers abroad, mainly in China, where gambling was illegal.

The closure orders against Imperial and Aplus were authorized under the BIR’s Revenue Regulations (RR) No. 20-2021 issued last month to serve as RR 11590’s implementing guidelines.

Internal Revenue Deputy Commissioner Arnel Guballa said that under RR 20-2021, “non-registration of Pogos with the BIR is considered as a fraudulent act, which bears with it the penalty of the implementation of closure orders against the erring offshore gaming licensees that shall necessarily include the closure of all their respective accredited service providers.”

Both Imperial and Aplus were located at Burgundy Corporate Tower in Sen. Gil Puyat Avenue, Makati, the BIR said.

“Their business operations will remain suspended and business establishments temporarily closed until the BIR’s registration requirements and other pertinent tax regulations are complied with and the corresponding deficiency taxes and penalties are paid,” said Guballa, who heads the BIR’s “Task Force Pogo.”

“We urge Pogos and all other taxpayers to please comply with their obligations. We will continue to strictly enforce the tax laws and raise the much-needed revenues for the government especially during this pandemic,” Guballa added.

Following registration, RA 11590 mandated payment of gaming tax equivalent to 5 percent of Pogo licensees’ gross gaming revenues (GGR), or 5 percent of the agreed, pre-determined minimum monthly revenues from gaming revenues, whichever is higher.

Licensees’ non-gaming operations will be slapped with 25-percent annual income tax, just like other firms which enjoyed the reduced rate under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Pogo licensees’ non-gaming revenues will also be subject to 12-percent value-added tax (VAT) or percentage tax.

Pogo service providers in and out of the country must shell out their yearly income taxes, plus withholding tax on purchases of goods and services.

Service providers’ sales of goods and properties, as well as services to Pogo licensees, will no longer pay VAT as long as they paid gaming taxes.

Foreigners working in Pogos must pay a 25-percent final withholding tax on their gross income. As such, all foreign — mostly Chinese — Pogo workers needed to secure a tax identification number (TIN) before employment here.

Last year, Finance Secretary Carlos Dominguez III said RA 11590 will allow the BIR to collect a total of P76.2 billion from Pogos in 2022 and 2023.

Dominguez had said an estimated P35.1 billion could be generated from the tax on GGR, on top of P41.2 billion from foreign Pogo workers’ personal income taxes.

The latest Pagcor data showed that only 36 Pogo licensees were left operating as of October 2021, out of the 41 licensed gaming operators. Before the COVID-19 pandemic happened, up to 60 Pogos operated in the Philippines in early 2020.

But the Pagcor document said Imperial’s license had been suspended.

Pagcor data also showed 127 accredited service providers last October, down from the pre-pandemic’s 218 firms employing around 130,000-150,000 people, of which about three-fourths were foreigners, mostly Chinese.

Aplus’ license as an accredited service provider had also been suspended, according to Pagcor.

The exodus of many players amid bigger taxes slapped here and the Chinese government’s intensified crackdown on online gambling in the mainland likely reduced tax-collection from Pogos last year, reversing the upward trend to P7.2 billion in 2020 from P6.42 billion in 2019 and P2.38 billion in 2018.

In 2020, the BIR ordered Pogos and their service providers to first pay their tax dues before they could resume operations whenever the government eased COVID-19 lockdown restrictions.

But some Pogos eventually left the country as gaming operators that were based outside the Philippines contested the BIR’s rules, specifically the payment of 5-percent franchise tax which they claimed covered only those operating in the country.

Prior to the pandemic, Dominguez estimated that as much as P20 billion in taxes could be collected from Pogos each year.

However, Dominguez last year said that China’s crackdown on online gambling since 2018, part of which required Chinese payment systems to report outflows estimated to reach $140 billion yearly, dampened clients in the mainland.

Pogos had been closing shop mainly as their source of gambling money — China — was “drying up,” Dominguez had said.