The economic contribution of Philippine offshore gaming operators (POGOs) remained significant and still a cause for concern once lost, the Senate Ways and Means Committee and the Department of Finance (DOF) said.
At Tuesday’s POGO hearing, Senator Sherwin Gatchalian, chairman of the Senate Ways and Means Committee, said POGOs pump in a total of P34.68 billion directly and indirectly to the Philippine economy.
While the amount only accounts for one percent of the country’s gross domestic product (GDP), Gatchalian believes that it is still a “significant” support to the local economy.
The figure is more than half of the P53-billion POGO economic contributions estimated by the National Economic and Development Authority in the pandemic-transition year of 2022, and a third of the P104.5 billion in total contributions during the POGO peak year of 2019.
Gatchalian said the top three POGO contributions are P10.9 billion in real estate taxes, P7.4 billion in taxes on retail stores selling household items, communications devices and other goods, and P7.2 billion representing the sector’s five percent franchise tax.
The rest are: P3.07 billion corresponding to the 25 percent withholding tax on foreign nationals, P1.78 billion in value-added tax, P1.683 billion in tax on food service activities, and P1.58 billion in remittances to national government.
In addition, the industry paid P1.41 billion in foregone tax on utilities, P232 million in corporate income tax, and P4.312 million in income tax.
“This is based on our own simulation. Would one percent GDP contribution warrant the continued existence of POGOs? .05 percent are minuscule...I want to break down ,” Gatchalian said.
“Assuming worst case, will that impact on our economy? Would one percent be a significant negative effect on the economy?” he added.
In response, Finance Undersecretary Bayani H. Agabin said the one percent effect on GDP is “quite big and a cause for concern.”
Gatchalian then asked where the government would source the P34.68 billion that would be lost if POGOs were shut down?
As regards the POGO workforce, Socioeconomic Planning Undersecretary Rosemarie G. Edillon said that from January to June 2022, 16,700 Filipinos are employed in POGOs, and additional 20,000 employed indirectly in the food and beverage, among others.
In 2019, indirect employment would be 25,000, and direct employment, 21,000.
Meanwhile, real estate expert David Leechiu said the sector will lose P19 billion in rent if POGOs leave the country.
He said about two million square meters of POGO residential space, which are twice as much as POGO office space, will be vacated if POGOs are illegalized today.
“Government is just as invested in collections and taxes from other businesses that grow with POGOs,” Leechiu said, noting that POGOs pay 1,200 to P1,500 per square meter in the office sector.
Government would also lose the 12 percent VAT on rentals, amounting to about P160 to P220 per square meter in office space, or P160 million to P220 million.
Transaction volume going down impacts the revenues of both private and public sectors. The condominium glut will further impact on the economy, Leechiu said.
Hearing this, Senator JV Ejercito said a real estate crash similar to 1997 should be avoided. “We don’t want the real estate industry to collapse,” he stressed.
Earlier in the hearing, Gatchalian asked the Association of Service Providers and POGOs (ASPAP) if technology transfer is happening in the industry and if it is possible for Filipinos to later run POGOs 100 percent.
ASPAP representative Michael Danganan said Filipinos are now taking key positions in POGOs.