The Department of Finance (DOF) said that China’s heightened crackdown on online gambling is the one forcing Philippine offshore gaming operations (POGO) to close shop, and not the government’s new tax measures.
Finance Secretary Carlos G. Dominguez III said the exodus of Chinese-run online gambling companies from the Philippines was bound to happen after Beijing began to impose strict new anti-gambling measures.
Dominguez said that Beijing’s moves to uncover online payment platforms being used by offshore gaming companies, such as POGOs, constrained the outflow of gambling funds out of China.
“We know for a fact that China has started cracking down on online gambling. All their moves to require Alipay, to require Tencent, and all those payment systems, start reporting in China is really putting a damper on the outflow of gambling dollars from China,” Dominguez said.
In September, President Duterte signed into law Republic Act 11590 or An Act Taxing POGOs. This measure is part of the government’s program to impose additional taxes on offshore gaming operations.
On the other hand, the Ministry of Public Security in China imposed stringent measures to combat cross-border gambling, shutting down thousands of gambling websites and payment platforms.
The Philippine Amusement and Gaming Corp. said that at least 28 POGO licensees have closed down their operations and properties in the Philippines since March 2020.
“I mentioned to people since 2018, China is sooner or later going to crack down on this [POGO]. Once the Chinese has started cracking down on that, of course, the business will go down here,” the finance chief said.
Any form of gambling is illegal under Chinese law and has has been banned since the Communist Party took power in 1949.
According to Dominguez, the amount of gambling money flowing out of China is estimated to around $140 billion per year, equivalent to P7.11 trillion.
“It’s not people going out [from the Philippines] because of our tax regime here, it’s because the source of the market is drying up,” he said.
But despite the exodus, the DOF still expects hefty tax revenues from offshore gaming businesses.
With the full implementation of POGO tax, Dominguez said the government is expected to generate P76.2 billion in incremental revenues between next year and 2023.
Of that amount, P35.1 billion will be generated from the collection of five percent tax on gross gaming revenues, and P41.2 billion from the 25 percent final withholding tax from gross income of the alien individual employees of the offshore gaming licensees.
“Again, you know, those are projections that will depend on how much money is going to be coming from the major source of the gambling [such as China],” Dominguez said.
In the first seven-months of the year, the Bureau of Internal Revenue collected P2.05 billion from POGO.
Last year, POGOs paid P7.18 billion in taxes to the government, up from P6.42 billion in 2019.