The Philippine House Committee on Ways and Means today approved a proposed 5% franchise tax on Philippine Offshore Gaming Operators (POGOs) and a 25% tax on the salaries of foreign POGO workers as part of an ongoing crackdown on tax-dodging foreign online gambling operators licensed in and operating from the Philippines.
The measure’s author, Albay Representative Joey Salceda, says that it could raise PHP45 billion (approx. $887.7 million) in taxes for the nation’s coffers each year.
Rep. Salceda, who chairs the House Committee on Ways and Means, submitted House Bill 5267 in late October. The piece calls for the implementation of a 5% franchise tax on gross winnings generated by POGOs that are licensed by the Philippine Amusement and Gaming Corporation (PAGCOR).
The Philippines’ gambling regulator currently collects a 2% tax from locally licensed operators. POGOs thus contribute around PHP8 billion in annual taxes.
According to Rep. Salceda, his bill would result in PAGCOR collecting more than PHP20 billion in an annual franchise tax. The regulator will have to remit everything to the Philippine Bureau of Internal Revenue (BIR).
BIR recently initiated a clampdown on offshore gambling companies that have systematically failed to pay their tax dues. Several POGO firms were ordered to shut their operations as part of the ongoing crack down, but were allowed to resume business after paying their taxes.
Rep. Salceda first indicated that he was drafting a tax-focused measure in early October. The lawmaker said back then that “codifying the tax regime for POGOs will provide the government with a broader set of levers to monitor and oversee the industry and to stabilize the gyrations in tax revenue intake and enforcement.”
Tax on Employees’ Salaries
Under House Bill 5267, foreign POGO employees will be required to pay a 25% tax on their salaries, wages, annuities, compensation, remuneration, and any other emoluments, including honoraria and allowances, at a minimum annual threshold of PHP600,000.
Foreign POGO staffers will thus have to obtain a Tax Identification Number before being allowed to work in the Philippines’ online gambling industry.
The bill reads that PAGCOR can only issue licenses to POGOs that have registered with BIR. During today’s hearing of the House Ways and Means Committee, the gambling regulator expressed its support for the measure. The bill was also backed by the Philippine Department of Labor and Employment and the Cagayan Economic Zone Authority.
Last month, Philippine Finance Secretary Carlos G. Dominguez III also expressed support for Rep. Salceda’s legislation. Mr. Dominguez said that while he had not seen the exact proposal, he thought that the implementation of a 5% franchise tax and a tax on foreign POGO employees’ salaries was a good idea.
The bill will now have to gain the necessary support on second reading in the House plenary in order to move closer to being enforced.
Of the proposed 5% franchise tax, Rep. Salceda told reporters that it was a “very proportional and reasonable” rate, given the fact that the probability of winning at a casino is 18%, which means that POGOs’ gross winnings stand at an average 82%.
Source: House panel OKs bill imposing taxes on POGOs, GMA News
