By CHINO S. LEYCO
An exodus of online casinos looms as the government’s gaming regulator confirmed that two offshore gaming companies, including a unit of Macau’s gambling giant Suncity Group, have left the country.
As stringent tax rules against online gaming deepen the effects of a ban on all casino operations during the community quarantine, the Philippine Amusement and Gaming Corp. (PAGCOR) said that more shutdowns of offshore gaming firms are forthcoming.
“Yes, Suncity has left,” Andrea Domingo, PAGCOR chair and chief executive, said when asked to confirm rumors that the Asia's leading casino junket operator had ceased its Philippine offshore gaming operations (POGO) business.
Jose Tria, PAGCOR assistant vice president for offshore gaming licensing, said that aside from Suncity, Don Tencess Asian Solutions has also sought for the cancellation of its license from the gaming regulator.
“I’ve heard there are other companies that also plan to cancel their licenses, but I haven't received their official letters so I can't name them yet,” Tria said.
While government allows offshore gaming centers to partially resume operations, majority of POGO licensees are still unable to reopen due to issues on taxes being imposed by the Bureau of Internal Revenue (BIR) against the industry.
The primary issue hampering the resumption of POGO operations is the BIR tax clearance, which requires foreign-based online casino licensees to pay additional franchise tax, including supposed arrears, on top of franchise fees paid to PAGCOR.
POGO licensees, which usually don’t have offices in the Philippines, are contesting the imposition of the BIR franchise tax since the Tax Code allegedly does not state that entities with no physical presence in the country are subject to the levy.
While tax agency admits that there is no clear provision under the law on overseas-based POGO licensees, BIR Deputy Commissioner Arnel Guballa pointed out that their business derives its income and profits within the country, therefore it should be slapped with additional franchise tax.
As the POGO standoff with BIR lingers, Domingo said “there are others more that are leaving the Philippines," which will not only affect government coffers, but also 30,521 Filipinos working for POGO companies.
Aside from POGO license holders, Tria said 13 service providers, which involve call center operations, telemarketing, systems and hardware support, as well as “live dealer” video streaming and other online games, have also closed shop.
He said among the contributing factors for POGOs’ decision to leave the country were government levies, particularly the franchise tax, and high overhead costs while their operations remain in limbo.
“There are other jurisdictions that have opened up offering better tax rates and friendlier environment,” Tria said. “Some also can no longer take the criticisms they get each day that make them feel unwelcome in our country.”
But Tria assured that PAGCOR is doing its best to help POGO licensees and their service providers to weather the storm brought on by the coronavirus pandemic and the changing business environment.
“We’re working on ways to allow the resumption of their operations, but you know, we can only do so much,” the PAGCOR official explained. “We are regulators, we have to do everything in accordance with the law.”
Tria said, however, that POGOs have the option to bring their franchise tax issue to courts.
“We're not tax experts. It is for POGOs to question the applicability of the franchise tax. Whatever the court decides, we follow. If they don’t want to question the tax, then they should pay it,” he stressed.
Property analyst David Leechiu of Leechiu Property Consultants warned that both office and residential businesses are at risk of losing substantial revenues should POGOs and their local service providers close shop.
According to Leechiu, POGOs currently occupy 1.7 million square meters of office nationwide and two million square meters of residential space.
Based on the property consultancy firm Colliers, the POGO slowdown will hurt Metro Manila real-estate industry as over one million square meters of office space, around 10 percent of leasable office space in the capital, are occupied by offshore gaming companies.