All POGOs subject to franchise tax

MANILA, Philippines — The Department of Finance (DOF) has maintained that Philippine offshore gaming operators (POGOs), whether based locally or abroad, must pay a five-percent franchise tax.

In an interview with “The Chiefs” on Cignal TV’s One News, Finance Assistant Secretary Antonio Lambino said POGOs without physical offices in the country are refusing to pay the franchise tax as they question the Philippines’ jurisdiction over them.

“They don’t have a physical office and therefore they’re claiming that they’re not liable for the five percent franchise fee. They’re resisting it with all their might,” he said.

Lambino also said that the POGOs are using the Office of the Solicitor General’s legal opinion on the matter to defend their position.

Last year, Solicitor General Jose Calida said foreign-based companies in the offshore gaming sector, whose income is derived from bets outside the Philippines, are not subject to tax in the Philippines.

However, Lambino said the DOF maintains its position that all POGOs, even those based abroad, must pay the five percent franchise tax.

“We believe that they are (liable for the franchise tax) because they earn money here and they operate here through their service providers. So they should be treated the same as the licensees that actually have physical offices here,” he said.

Currently, there are 60 POGOs licensed by the Philippine Amusement and Gaming Corp. (PAGCOR). Lambino said only about 10 of these have physical presence in the country.

To strengthen the government’s legal ground on the issue, Lambino said Congress has already drafted a legislation that would clarify the taxation of POGOs.

“(Albay Rep.) Joey Salceda already made very clear in his draft bill that there are no ifs or buts. That whether you are locally or domestically located, or located in a foreign jurisdiction, you owe that five percent franchise fee. This draft bill makes this very very clear,” Lambino said.

“The goal really is to clarify the regulatory environment and the law around this issue so that we have a stronger leg to stand on when we go after that five percent,” he said.

According to Lambino, the payment of franchise taxes is one of the conditions set by the government before POGOs could be allowed to resume their operations.

On top of this, they are also required to settle their income taxes and withholding taxes, and to pay PAGCOR a guarantee fund of about P350 million.

Lambino said the government has made progress in the collection of the withholding taxes on the income of POGO employees since the Bureau of Internal Revenue (BIR) improved its enforcement last year.

The DOF official also clarified the P50 billion estimated unpaid taxes from POGOs circulating in news reports, saying this is a “rough back-of-the-envelope computation.”

Of the amount, P24 billion accounts for the annual collection expected by the BIR from taxes withheld by POGOs on the income of their employees, he said.

“I think the number was around P17 billion to P18 billion from franchise fees. And then combine that with the P24 billion, they kind of rounded it up big time to P50 billion,” he said.