The Philippine National Tax Research Center (NTRC), a Department of Finance-attached research unit, said in a report that it supports the introduction of taxes on lottery winnings and charging fees for entering local casinos.
Experts from the research center wrote in their report, Profile and Taxation of Selected Gambling and Betting Activities in the Philippines, that horse racing options are not treated equally with casinos and lottery as the former are burdened with more taxes.
The NTRC further explained that Philippine horse racing clubs need to pay a number of taxes, including corporate, franchise and value-added ones. In addition to this, under the country’s tax code, a tax on horse racing winnings also needs to be paid.
On the other hand, the Philippine Charity Sweepstakes Office (PCSO), which manages the local sweepstakes and lottery services, does not pay any such taxes. As for the Philippine Amusement and Gaming Corp. (PAGCOR) and the Philippines’ licensed casinos, they do not pay a tax on winnings.
Those who win on horse racing are to pay a documentary stamp tax and a percentage tax on winnings. Casino players, however, only pay a withholding tax on prizes higher than PHP10,000. Residents who place bets on sweepstakes or lottery are only expected to pay documentary stamp tax.
The NTRC said in its report that “players in the identified gambling and betting activities” are not treated fairly when it comes to taxes. However, experts from the Philippine Department of Finance tax research unit pointed out that both PAGCOR and PCSO are less heavily taxed due to their mandatory financial contributions to the government, which result in economic and health assistance benefits to residents.
The NTRC quoted an official for the Philippine Racing Commission, saying that the country’s horse racing industry generates lower gross sales because of the high taxes it has been imposed. This is why experts at the tax research center said in their report that they support the pending bills in the Philippine congress, addressing the unfair tax treatment.
House Bill 4859 calls for charging an entrance fee of PHP3,500 in local casinos. The NTRC said that it supports the proposal as the money would be collected from residents who have the capacity to spent more money at casinos.
Experts at the research center also said that they support the proposal for the introduction of a 20% final tax on lottery winnings. House Bills 4742 and 4774 call for such tax and according to the NTRC, it is absolutely justifiable as lottery is the only form of gambling in the country that is not subject on winnings tax.
The NTRC report, however, said that certain refinements need to be implemented in the proposed bills, particularly the ones dealing with the tax on lottery winnings. Experts noted that the bills’ sponsors need to specify the amount of lottery winnings that will be subjected to the tax. They pointed out that a blanket application of such regulation may result in even small prizes being subjected to the proposed tax.
