POGO tax bill set to be adopted, places 5% rate on GGR

Online gambling offices

The House of Representatives in the Philippines is reportedly ready to adopt a new bill clarifying the tax liabilities of Philippines Offshore Gaming Operators (POGOs), with only minor differences from that passed by the Senate.

The House Ways and Means Committee chair noted that there was “no difference” in the final bill regarding tax rates and tax bases.

The nation’s Department of Finance, over the weekend, proclaimed its approval of the proposed legislation.

The changes will require all foreign employees of POGOs to have a Tax Identification Number and be subject to taxation, while also requiring all POGOs to pay a 5 percent tax on gross gaming revenues. The number had previously been set at the current tax rate of the special economic zones each was registered under, or the 5 percent rate, whichever was higher.

One new change to the law prevents the Aurora Pacific Economic Zone and Freeport from issuing new POGO licenses while transferring those currently registered to the purview of PAGCOR.

Over the weekend, the country’s Finance Secretary told reporters that they were “generally supportive of the bill,” one which will impose a 25 percent withholding tax on foreigners employed by the offshore gambling licensees and service providers.

According to the country’s oversight body, PAGCOR, at last 33 POGOs and 200 service providers had already stopped their operations in the country amongst the ongoing pandemic, with expectations the segment’s income would not even reach half of the revenue registered in pre-pandemic years.

The downturn has also caused the Philippine president, who has been highly critical of the industry, to switch his tone, noting that the nation should “encourage” gambling-related industries in order to help drum up funds, noting “we need money for the country”.

The House Means Ways and Means Committee chair said that the proposed changes should raise tax revenues from POGOs by PHP13.4 billion ($266.6 million) in its first year of implementation, and nearly PHP 177 billion in five years.

Aside from the tax provisions, the Philippine government is also mandating stringent measures on personnel monitoring, operating supervision and increased penalties for law violations, with a particular focus on tax evasion.

As of December 2019, some 84 percent of POGOs were located in the National Capital Region, with 27 in Makati City, 12 in Pasay and five in Manila. Some 10 POGOs are considered to be “local-based”, while 51 are foreign based. According to a government estimate, over 118,000 personnel were employed in POGOs under PAGCOR licencees as of December 2019, of which over 80 percent were foreign employees.