EDITORIAL - No value-added

Even mom-and-pop home-based sari-sari or neighborhood convenience stores in this country are checked by City Hall and the tax police for business permits and licenses, including registration with the Bureau of Internal Revenue.

So the idea that Philippine offshore gaming operators or POGOs and their service providers, which have mushroomed across the country, are being spared from taxation is galling not only sari-sari store owners but also bigger business operators and even lawmakers.

The Office of the Solicitor General, in an opinion submitted to the Philippine Amusement and Gaming Corp. and the BIR, has reportedly declared that because of the POGO business model, the Philippine government cannot collect as much revenue as it wants from offshore gaming. The government estimates POGO revenues at P200 billion a year, sourced mainly from bets placed from abroad, much of it from the Chinese mainland. Because the income is sourced mainly from overseas, it is exempt from Philippine taxation, according to the OSG.

Beijing has urged Manila to stop POGO operations, pointing out that gambling in all its forms including offshore gaming is prohibited by law for Chinese citizens. Manila retorted that offshore gaming is allowed under Philippine laws and the POGOs would continue operations.

As one lawmaker pointed out recently, however, if the Philippine government is collecting a measly amount in revenue from POGOs, and cannot even collect income taxes from the gaming employees, who needs POGOs and their service providers? Restaurants, groceries and other businesses that cater exclusively to Chinese are also evading the Philippine tax police. The government cannot even keep an accurate record of Chinese nationals who obtain tourist visas on arrival in the Philippines but in fact intend to work on one-year contracts for POGOs.

PAGCOR has reportedly warned that if the government tightens regulation of POGOs, the operators might go to friendlier countries. But where might that be? Cambodia has already shut down its offshore gaming operations. Other Asian countries have tighter rules on both gaming and labor standards.

Yesterday a bill was filed, seeking to impose higher taxes on POGOs, their service providers and employees. It was an acknowledgement of what the solicitor general pointed out – that POGOs and their service providers cannot be taxed for their main activity, which is collecting bets from overseas. If there is so little value-added for the Philippine economy, and with social tensions created by offshore gaming, the minuses far outweigh the pluses for the continued operations of the POGOs.