House panel approves bill setting 5% tax on POGOs

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A House panel approves a bill setting a uniform 5 percent rate on the profits of online gaming firms, which a lawmaker expects to raise ₱45 billion yearly.

Metro Manila (CNN Philippines, November 18) — A bill setting a uniform 5 percent franchise tax on Philippine Offshore Gaming Operators (POGOs) has been approved by a House of Representatives panel.

On Monday, the House Committee on Ways and Means approved a measure proposed by its chairman Albay 2nd District Representative Joey Salceda that imposes a uniform tax rate for POGOs. This comes as government agencies chase after these online gaming firms for back taxes, including their foreign employees.

House Bill 5267 sought to provide a "clear, definitive tax regime" for POGOs to ensure stricter oversight and collect appropriate taxes from these gambling businesses. Under the measure, POGO franchise holders are required to pay a tax worth 5 percent of its gross receipts drawn from gaming operations.

In a Facebook post, Salceda said the tax "will raise ₱45 billion every year."

Foreigners working in POGOs based in the country should also pay taxes worth 15 percent of their earnings here, according to the bill.

READ: DOF backs additional 5% tax on POGOs

In a letter to the House, Solicitor General Jose Calida said he was of the view that POGOs cannot be taxed as they only offer betting facilities "only to foreign citizens physically outside of Philippine territory."

"An offshore-based operator is subject to Philippine taxes only on its income derived from sources within the Philippines... For POGO betting transactions, the situs of taxation is the place where the actual betting took place and where the winnings are paid out," the Office of the Solicitor General said.

In a statement, Senate Minority Leader Franklin Drilon this claim, saying that it was the Bureau of Internal Revenue (BIR) which has the authority to interpret the tax code. 

"The government has the right to tax POGOs, consistent with the position of the economic managers. POGOs owe the government billions in unpaid taxes. The OSG should leave the matter to the BIR and DOF (Department of Finance),” said Drilon, a lawyer. He called the OSG "misguided."

Finance Secretary Carlos Dominguez III previously ordered a crackdown on POGOs not paying their dues, and has been sending demand letters through the BIR. The agency estimates about ₱2 billion in monthly income taxes uncollected from foreign workers in this sector.

Dominguez also responded to the Solicitor General's remarks: "Since POGOs are providing services to their counterparts in the Philippines, they are subject to income tax. The same is true for VAT (value-added tax), which also is imposed on services rendered in the Philippines."

The BIR served closure orders for two POGO service providers based in the country. Both have resumed operations after settling their unpaid taxes. Authorities have also made it a requirement for foreigners to secure Tax Identification Numbers before they are allowed to work here.

The Philippine Amusement and Gaming Corporation stopped accepting new applications for POGO licenses in August, amid growing concerns about job losses and even national security.

CNN Philippines Correspondent Xianne Arcangel contributed to this report.