POGOs start to exit the Philippines

Philippine-based companies that offer online gambling services to offshore markets, such as China, fueled office market growth in the country last year. — REUTERS

Two Philippine offshore gaming operators (POGOs) have exited the country, according to the industry regulator, with more expected to follow suit as they face difficulties in securing tax clearance from the Bureau of Internal Revenue (BIR).

In a text message to reporters, Philippine Amusement and Gaming Corp. (PAGCOR) Chairperson and Chief Executive Officer Andrea Domingo said Macau-based casino operator SunCity Group has closed its POGO operations in the country.

“There are others more that are leaving the Philippines,” Ms. Domingo said over the weekend.

PAGCOR Assistant Vice-President for Offshore Gaming and Licensing Department Jose S. Tria, Jr. told reporters Don Tencess Asian Solutions, Inc. also asked the regulator to have its license canceled.

“I’ve heard there are other (POGO) companies that also plan to cancel their licenses, but I haven’t received their official letters so I can’t name them yet,” he said.

According to Mr. Tria, POGOs are now leaving the Philippines largely due to the stringent tax rules from the BIR, particularly on the franchise tax. POGOs are also hurting as they face huge overhead costs despite an ongoing ban on some gambling activities.

“There are other jurisdictions that have opened up offering better tax rates and friendlier environment. Some [POGOs] also can no longer take the criticisms they get each day that make them feel unwelcome in our country,” he said.

So far, around 13 POGO service providers have closed their shops, Mr. Tria said.

Finance Assistant Secretary Antonio G. Lambino II said in mid-June the BIR faced difficulties in collecting the five percent franchise tax from licensed POGO companies based overseas. These companies have stood firm that they are not required to pay this franchise tax since they are not based in the Philippines.

The BIR and the Department of Finance (DoF) also maintained the tax, which is on top of the two percent franchise fee imposed by PAGCOR, should be settled by POGOs.

PAGCOR’s Mr. Tria said the regulator is “working on ways” to help POGOs resume their operations.

“But we can only do so much. We are regulators, we have to do everything in accordance with the law,” he said.

However, Mr. Tria said POGOs still have the option of elevating the franchise tax issue to the courts if they want to clarify the issue.

“We’re not tax experts. It is for POGOs to question the applicability of the franchise tax. Whatever the court decides, we follow. If they don’t want to question the tax, then, they should pay it,” he said.

Payment of franchise tax is one of the requirements needed for a licensed POGO to secure tax clearance from the BIR.

Operations of POGOs and their service providers have been allowed to resume since early May, provided they observe minimum health standards and submit the tax clearance.

Officials from the BIR have not disclosed how many POGOs have received tax clearances.

Mr. Lambino had said around 10 out of 60 licensed POGO companies have offices in the Philippines and the rest are based offshore, while there are more than 200 POGO service providers.

The government collected P6.42 billion in taxes from the POGO industry last year, up 170% from the P2.38 billion generated in 2018. — B.M.Laforga

Source: Peso Economics