Tax cut as POGO workers flee COVID-19

MANILA, Philippines – Government tax revenue from the overseas gambling business is falling as operators close their stores and their mostly Chinese workers flee the novel coronavirus in the Philippines, the worst-affected country by the COVID-19 pathogen in Southeast Asia.

An Internal Revenue Bureau (BIR) official told the Inquirer on Friday that the agency was conscientiously collecting tax liabilities from Filipino so-called foreign gambling operators (Pogos), service providers and their employees.

But recent collections were lower compared to collections before the coronavirus pandemic, said Deputy Revenue Commissioner Arnel Guballa.

However, actual figures were not yet available, he said.

Fear of COVID-19

“The problem remains the same, the pogo are closing, because they fear COVID-19,” said Guballa, who heads the Pogo working group of the BIR.

“Many Chinese worker visas were canceled and they returned to China because there are many positive cases of COVID-19 in the Philippines,” he said.

The website of state-owned Philippine Amusement and Gaming Corp. (Pagcor), which regulates Pogo’s industry, had listed 55 registered operators as of September 8, up from 60 at the beginning of the year.

Among the licensed Pogos, only 29 had received authorization to resume operations as of September 8, Pagcor data showed.

Earlier, the agency announced that a pair of Pogos closed and left the Philippines due to tax problems.

In May, when the government began easing coronavirus lockdowns and enacted minimum health standards, the BIR issued rules that required Pogos and its service providers to pay their taxes first before they could resume operations.

Several Pogos based outside of the Philippines contested the BIR requirement, especially the 5 percent franchise tax, which they claimed covered only gaming operators located in the country.

Pagcor’s data does not show how many Pogos abroad there are.

In July, the BIR reiterated that the revenue rules it issued in 2017 imposed a franchise tax on all Pogos, whether here or abroad.

Revenue Commissioner Caesar Dulay said at the time that “Pogo licensees or operators are not being assessed or paying income and other taxes because BIR’s RMC 102-2017 clearly states that instead of such taxes, they are only subject to franchise tax. “

“Only Pogo service providers are subject to regular taxes, such as income and value added tax (VAT). However, both Pogo operators and service providers whose employees earn compensation income must withhold and remit the taxes owed, ”Dulay said.

“The income rules stipulate that foreign nationals’ compensation income will be withheld at 25 percent of the final withholding tax. However, instead of remitting the final withholding tax, most are only remitting the withholding tax on compensation, which is based on lower rates based on the total amount of earnings of each employee, “he said.

Licensees employ service providers in the Philippines whose workers deal directly with their clients, online players abroad, mainly in China, where gambling is illegal.

The latest data from Pagcor showed that as of September 8, 99 accredited local gaming agents and service providers had been allowed to resume operations.

Before the coronavirus outbreak, there were as many as 218 service providers employing between 130,000 and 150,000 people, at least three-quarters of whom were foreigners, mostly Chinese.

Requirements eased

Subsequently, the BIR relaxed some fiscal requirements before Pogos could resume operations.

In June, Finance Secretary Carlos Domínguez III said that up to 20 billion pesos in corporate and personal income taxes could be collected from Pogos each year.

An intensified BIR campaign against tax-evading Pogos resulted in P6.4 billion in industry tax collections last year.

Before 2019, the Pogo sector’s tax revenue was only about P1 billion a year, Domínguez said.

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