By Chino S. Leyco
Finance Secretary Carlos G. Dominguez III said yesterday that Philippine offshore gaming operators (POGO) are subject to taxes and the opinion of the Office of the Solicitor General (OSG) has no bearing in interpreting the country’s tax code.
Finance Secretary Carlos G. Dominguez III (DOF photo / Howard Felipe)
Dominguez, who oversees the Bureau of Internal Revenue (BIR), said that Solicitor General Jose C. Calida has no jurisdiction over the Internal Revenue Code, noting the interpretation of the tax laws is lodged within the tax agency.
“The BIR issued an opinion to this effect months ago saying that the situs of income is where the services are rendered. Thus, since POGOs are providing services to their counterparts in the Philippines, they are subject to income tax,” Dominguez told reporters.
“The same is true for value-added tax (VAT), which also is imposed on services rendered in the Philippines,” he added.
Philippine Amusement and Gaming Corp. (Pagcor) Chair Andrea D. Domingo, meanwhile, said the current Internal Revenue code has no clear rules on the tax liabilities of POGOs that generate income from their operations of online casinos.
While these POGO companies were registered with Pagcor and licensed to operate online casinos catering only to non-Filipino gamblers, Domingo said their revenues from bets were not covered by the BIR.
Domingo’s statement is aligned with Calida’s opinion that income derived by the Philippine offshore gaming industry cannot be subject to tax based on the “source of income” principle stimulated under the Philippine tax code.
Calida explained bets placed on an Internet-based platform are considered outside the Philippines, therefore not subject to existing tax laws of the country.
“In absence of any clear law covering the taxability of the income of the offshore based POGO operators, then the opinion of the OSG would be prevailing,” Domingo said in a mobile phone message.
But the Pagcor chief also said that Congress can still pass a law that will “clearly” govern the tax rules on income derived by POGO companies from their Philippine-accredited online casinos.
“If Congress passes a law clearly providing for the tax accountabilities of POGO operators, then we should abide by it as it is the law,” she said.
Domingo, however, clarified that OSG’s opinion only pertains to POGO companies that hold a Pagcor license to operate Internet-based casinos but do not have any physical presence within the Philippines.
She said POGO service providers, who mostly employ Chinese nationals and have been the subject of BIR and DOF scrutiny, are subject to Philippine taxes.
The offshore gaming industry has a complex business scheme regulated by Pagcor. On top of the operations is the POGO license-holder that farms out its call-center, IT, and casino dealers, among others to the so-called “service providers.”
Online casino players also place their bets and winnings are credited using non-Filipino bank accounts held by foreign financial institutions.
Earlier, the BIR padlocked two POGO service providers for failure to comply with VAT rules.
The Duterte administration is targeting to collect at least P2 billion in personal income taxes from foreign nationals employed by 218 POGO service providers operating in the country.
Dominguez earlier said the BIR will squeeze all POGO service providers that remain non-compliant with tax laws and regulations despite several notices.