Senators: SC ruling on POGO 5% tax moot, academic

Paolo Romero - The Philippine Star
Senators: SC ruling on POGO 5% tax moot, academic
This file photo shows the Supreme Court.
The STAR / file

MANILA, Philippines — The Supreme Court (SC) ruling that rendered the five percent franchise tax on Philippine offshore gaming operators unconstitutional is now moot and academic due to the passage last year of Republic Act 11590, which provides for the detailed tax obligations of POGOs, lawmakers said yesterday.

In the 42-page decision – penned by Associate Justice Samuel Gaerlan and promulgated on Dec. 7, 2021 but published only Sept. 21, 2022 – the SC stated that Section 11 (f) and (g) of the Bayanihan 2 Law is unconstitutional for violating the “one subject, one title rule” of the Constitution.

Section 11 of Bayanihan 2 mentions a five percent franchise tax based on the gross or turnovers earned by POGOs.

In the Senate, Senate President Juan Miguel Zubiri said the chamber will respect the ruling, although it has been rendered moot and academic.

“We however reiterate our call for the government to take a hard look at our POGO policy. We have to undertake an in-depth review of the pros and cons of allowing POGOs to operate in our country in light of the recent spate of abduction cases and other established negative social costs,” Zubiri said.

Former Senate president Vicente Sotto III, during whose term the Bayanihan 2 was passed, said the law was enacted at the height of the pandemic and “we gave due considerations to that.”

Sen. Risa Hontiveros said the SC, in its ruling, effectively removed the last remaining justification for POGOs – their revenue contributions to the national coffers.

Senate Minority Leader Aquilino Pimentel III told reporters that all POGOs – whether legal or illegal – should be outlawed. “So let’s not make our lives difficult. Let us go for the policy that it is easier to implement: total ban on POGOs,” Pimentel said partly in Filipino.

Senate Majority Leader Joel Villanueva agreed, saying that the collection of taxes on gaming and non-gaming revenues is not enough to justify the continued operations of POGOs.

In Congress, House ways and means chair Joey Salceda yesterday said he is elated by the SC ruling that “implicitly affirms the validity” of the POGO Tax Law or RA 11590, which he principally authored.

Salceda stressed that the country already has “the most brutal tax measure ever imposed on any sector of the Philippine economy” but concerned agencies just have to implement them.

He added that the SC decision is “consistent with the Supreme Court’s general doctrine of preserving the power of Congress to determine tax policy as an exclusive power.”

From January to October 2021, prior to the implementation of RA 11590, the country was collecting only P300 million per month in taxes from POGOs.

After the law’s implementation, POGO taxes jumped to P410 million monthly for the rest of 2021. By January 2022, it was up to 540 million for the month.


Aside from declaring the unconstitutionality of the five-percent tax on POGOs, the SC also invalidated tax issuances Revenue Regulation No. 30-2020 of the Department of Finance and Revenue Memorandum Circular (RMC) No. 64-2020 of the Bureau of Internal Revenue, which merely implement Section 11 (f) and (g) “for having no legal basis.”

It also emphasized that there was no law passed, which imposes a five percent franchise tax on POGO licenses prior to the enactment of Bayanihan 2, prompting it to declare RMC No. 102-2017 and RMC No. 78-2018 of the BIR as invalid “because it was passed without any statutory basis.”

“All in all, before the enactment of RA No. 11590, there is no valid law which imposes taxes upon POGOs, including offshore-based POGO licenses. However, this court deems it proper to emphasize that RA No. 11590 cannot be applied retroactively,” it added.

The SC said that POGOs, including offshore-based POGO licenses, cannot be made liable for taxes prior to the enactment and effectivity of the subject law. – Sheila Crisostomo, Robertzon Ramirez


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