POGOs must go

A senior official of the Anti Money Laundering Council (AMLC) told the Senate last week that P14 billion worth of transactions by POGOs from 2017 to 2019 were related to suspicious activities. But President Duterte is not impressed. He will not suspend POGO operations because he said he needs the money to cover expenses to contain the coronavirus disease 2019 (COVID-19).

AMLC executive director Mel Georgie Racela told a Senate hearing last Thursday that most of the activities they monitored violated the E-Commerce Act, while others involved drug trafficking, lack of legal or trade obligations, deviations from clients’ profiles, funds not commensurate to the business or personal capacity of a client, lack of proper client identification, and fraud.

Speaking for the President, Sal Panelo said out President Duterte would not suspend it, nor would he stop POGOs because government has earned at least P7 billion from POGOs last year.

But Prinz Magtulis, editor at @PhilstarNews, crunched some numbers to understand better the context of the numbers being tossed around.

“We start with PAGCOR, the government agency mandated to share 50 percent of its annual earnings with the national government. Last year, that amounted to P35.92 billion. Part of those earnings came from fees paid by POGOs.

“How much revenues were collected from POGOs last year? PAGCOR data show P5.7 billion, a decline from the P6.12 billion previous year. This is lower than the P8 billion being reported in Senate hearings.”

In a series of tweets, Prinz noted that “Senators have questioned the amount collected from POGO fees vis-a-vis supposedly billions of pesos in tax leaks from their operations here. And for valid reasons.

“For context, the P5.7 billion earned from POGO fees is lower than the following: revenues from rice tariffs last year (P12.3 billion), BSP remittances to gov’t in 2018 (P21.48 billion) and additional revenues from higher and new excise taxes this year (P63.2 billion).

“The government can also borrow weekly from local creditors through bond offerings where at least P20 billion is raised every time there is a full award. Point is revenues collected from POGO operations, at least those directly going to gov’t coffers, are negligible.”

Worse, the Bureau of Internal Revenue also said that only 10 out of 60 registered POGOs pay taxes. According to Sen. Sherwin Gatchalian, POGO operators are “skirting” our tax laws, costing the government some P51 billion in revenues. Based on his calculations, Gatchalian said the BIR has only collected P11 billion from POGOs, when the amount should have been P62 billion.

Out of the 60 POGO licenses issued by PAGCOR, only 11 are registered in the Philippines, while the rest are foreign-registered, Gatchalian pointed out.

Of the 11 POGOs registered with PAGCOR, eight have been refusing to pay licensing fees, a tax official said. Among the 11 current internet gambling licensees, only three POGO firms are paying the five percent Philippine franchise tax, said Arnel Guballa, deputy commissioner of the Bureau of Internal Revenue (BIR).

“Their (POGOs) assertion is that, ‘We are offshore, we are outside the Philippine jurisdiction,’ but the contention of BIR is, ‘Since you registered with PAGCOR, then you are under Philippine law,’” Guballa told senators.

The POGO operators are citing the opinion of Solicitor General Calida that “foreign-based operators are not liable to five percent (franchise tax),” said Dave Fermin Sevilla, who chairs PAGCOR’s Anti-Money Laundering Supervision and Enforcement Department.

I asked Finance Secretary Carlos Dominguez what happens next. The Secretary firmly said that they would make the POGO operators pay. He also said Calida has no jurisdiction on the matter and he subsequently wrote a letter to that effect.

It is just as well that Sec Sonny is determined to collect from the POGOs. As one netizen observed on Facebook, it doesn’t look right for Duterte to just let them get away with non payment.

“Inaway nya Maynilad for P3.4 billion and Manila Water for P7.4 billion that these companies won sa arbitral ruling in Singapore, but he protects POGOs who have NOT paid P50 billion in taxes.”

Outside of the property sector, there is a strong local sentiment against the continued operations of POGOs here. Main complaint is the social costs we have to pay to host the gambling operations which are deemed illegal in their home country of China.

There is the general feeling that criminal elements in China have come here with the POGOs. Cases of prostitution, money laundering, kidnapping, illegal employment, kidnapping, extortion, torture, murder are increasing the work load for the local police.

Police Lt. Gen. Guillermo Eleazar, PNP deputy chief of operations, told the Senate that the rise in kidnapping and prostitution cases in the country is directly linked to the influx of Chinese workers to the Philippines.

The general said some 199 trafficked women were rescued from Chinese-run prostitution dens last year, of which 173 were Chinese, including one minor while 59 of the 60 suspects arrested for their involvement in sex trafficking were Chinese.

“We did not have these kinds of operations three years before,” Eleazar told members of the Senate Blue Ribbon committee.

“The increase in crime is directly dependent [on] the number of Chinese nationals who arrived here,” he told reporters in a separate interview.

BSP Governor Benjamin Diokno has consistently expressed his disapproval of continued POGO operations in the country. He has also downplayed the impact to the economy if we let POGOs go.

Diokno’s main concern is money laundering which has reached alarming levels in recent months. It is suspected that money laundering activities involving Chinese nationals are related to the POGOs.

With the increasing calls for the closure of POGOs due to crimes and corruption schemes involving Chinese nationals, the central bank chief who also chairs the Anti-Money Laundering Council (AMLC) said that looking at the “benefit and cost” of the online gambling sector to the economy, he is not in favor of their continued operations.

In other words, Diokno is saying POGOs are more trouble than they are worth.

But is the President listening?

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco