The Supreme Court (SC) has declared final its 2022 decision that nullified as unconstitutional the five per cent franchise tax on the gross bets from the operations of the Philippine Offshore Gaming Operators (POGOs).
In a resolution, the SC denied the motion for reconsideration filed by the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR).
On Sept. 29, 2022, the SC declared Section 11 (f) and (g) of the Bayanihan 2 Law, the Covid-19 Response and Recovery Intervention Act, as unconstitutional for being “riders.”
Section 11 (f) and (g) of the Bayanihan 2 Law provides a list of sources of fund to address the Covid-19 pandemic which included the amounts derived from the five percent franchise tax on the gross bets from POGOs and income tax, value-added tax and other applicable taxes on income from non-gaming operations earned by POGO operators, agents, service providers and support providers.
The decision was issued on the petition filed by offshore-based gaming operators -- Saint Wealth Ltd., Marco Polo Enterprises Limited, MG Universal Link Limited, OG Global Access Limited, Pride Fortune Limited, VIP Global Solutions Limited, AG Interpacific Resources Limited, Wanfang Technology Management Ltd., Imperial Choice Limited, Bestbetinnet Limited, Riesling Capital Limited, Golden Dragon Empire Ltd., Oriental Game Limited, Most Success International Group Limited, and High Zone Capital Investment Group Limited.
In granting the petition, the SC ruled that Section 11 (f) and (g) violates Section 26, Article VI of the Constitution which mandates that “every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof.”
It said the prohibition against riders “is to prevent hodge-podge or log-rolling legislation, and to ensure that all provisions of a statute have some reasonable relation to the subject matter as expressed in the title thereof.”
It noted that the BIR and the DOF even admitted that the Bayanihan Law is not a tax measure.
Thus, the SC stressed that the imposition of new taxes, “camouflaged as part of a long list of existing taxes, cannot be contemplated as an integral part of a temporary Covid-19 relief measure.”
It then declared that BIR Revenue Regulation No. 30-2020, Revenue Memorandum Circular No. 64-2020, Revenue Memorandum Circular No. 102-2017 and Revenue Memorandum Circular 78-2018, in so far as they impose franchise tax, income tax and other applicable taxes on off-shore based POGOs, are “null and void for being contrary to the Constitution and other relevant laws.”
The SC decision also directed the government to refund POGOs of the five percent franchise tax it collected from them under the Bayanihan 2 Law.