The House of Representatives Ways and Means Committee has approved a 5% franchise tax on companies and workers engaged in Philippine offshore gaming operations (POGOs).
Amendment of 1997 National Internal Revenue Code of the Philippines
On Monday, the panel, chaired by Albay Representative Joey Salceda gave the go-ahead of House Bill 5257, which seeks to charge offshore gaming companies on their gross income coming from gaming operations. The bill also seeks to impose additional 25% tax on the salaries of POGO employees with a minimum annual threshold of P600,000.
According to Salceda, who is also the author of House Bill 5257, the new taxes will increase the national government’s revenue by P45 billion.
House body, both Majority and Minority, unanimously approved tax on Pogo
What is new on Sections 22, 25 and 119?
The new bill introduces changes in Sections 22, 25 and 119 of the 1997 National Internal Revenue Code of the Philippines. Under the new terms, Philippine Amusement and Gaming Corporation (PAGCOR) will pay 5% gross revenue tax instead of the 2% so far.
In particular, Section 22 establishes a definition of an Offshore Gaming Licensee (OGL – or POGO) and namely an “offshore gaming operator, duly licensed and authorised to provide offshore gaming services”. Such an OGL may either be a Philippine-Based Operator – a duly constituted business enterprise organised in the Philippines, or an Offshore-Based Operator organised in any foreign country, who will engage the services of any PAGCOR licensed service provider. In any case, an OGL shall be considered operating in the Philippines and therefore shall be subject to taxation.
The new text of Section 25 reads that individuals who are permanent residents of a foreign country and are employed by an OGL in the Philippines shall set aside 25% of their salary, wage, annuity, compensation, remuneration or other emoluments, such as honoraria and allowances received from such operators.
And the third amendment, which is titled “Tax on Franchise” and deals with Section 119, imposes a 5% tax on offshore gaming companies’ gross receipts derived from gaming operations covered by the law granting the franchise, as per the government’s press release.
House Bill 5257 receives full suport during the hearing
Cagayan Economic Zone Authority (CEZA) Administrator and Chief Executive Officer Atty. Raul Lambino advocated for the bill during the hearing and said that currently it is unclear if POGOs are actually operating in the Philippines or abroad. Lambino explained that despite the actual process of betting and paying is happening abroad, POGOs are doing business in the Philippines through their service providers and their income should be taxed.
PAGCOR senior manager for policy development Jessa Mariz Fernandez also spoke in favor of the bill. During the hearing, she raised the question if the 5% charge will be added on top of the already existing 2% or will replace them. Salceda clarified that the new tax will entirely substitute the previous one.
Some 60 POGOs are operating with licenses granted by PAGCOR at the moment, while about 218 service providers employee foreign workers who are mostly Chinese.