SC halts move to tax POGOs

MANILA, Philippines — The controversial Philippine Offshore Gaming Operators (POGOs) industry scored a major victory yesterday after the Supreme Court halted the government’s move to tax POGOs.

The High Court issued a temporary restraining order (TRO) barring the Department of Finance (DOF) and Bureau of Internal Revenue (BIR) from imposing a five percent franchise tax on all bets collected by POGOs, Supreme Court sources said.

Voting 13 to 1, the High Court issued the TRO which prevents the government from enforcing Section 11 of Bayanihan II, BIR Revenue Regulation 30-2020 and Memorandum Circulars 102-17 and 078-18.

The SC has yet to issue an official announcement on the matter as of this writing.

The High Tribunal acted on the petition filed by 14 foreign-based POGOs which petitioned threats arising from what it called government’s imposition of unreasonable taxes and regulations.

The 14 petitioners are all holders of offshore gaming licenses from the Philippine Amusement and Gaming Corp. (Pagcor), the gaming regulator.

In their petition, they said Bayanihan II was envisioned as a temporary relief measure apparently enacted to address the COVID-19 pandemic and raise funds for the purpose.

“However, a closer examination would show that Sections 11 (f) and (g) of the Bayanihan II Law imposes new taxes (in the guise of merely listing sources of funding) and are, therefore, an aberration because the entire law does not create or refer to the imposition of any new tax,” they noted.

Counsel for petitioners asserted that for a mere opportunity to operate, their clients would be “forced to pay the tax on their offshore income, even if the imposition is not constitutional.”

In a statement, the group also said the law unfairly uses as “tax base” the totality of wagers made through POGOs even as these bets are made online outside the Philippines in violation of the territoriality principle of taxation. Moreover, by using “gross bets” as a tax base, it will necessarily include money eventually paid out as winnings by the firms.

“Since the tax base is the totality of the wagers made, without deducting or excluding the winnings or money paid out to patrons, what this means is that the petitioners are being made to pay tax even on money that does not flow to them as wealth or redound to their benefit, not to mention the fact that these are bets made offshore or outside of the Philippine taxing jurisdiction,” the petitioners said.

Petitioners include Oriental Game Limited, Golden Dragon Empire Ltd., Riesling Capital Limited and 11 others.

Sought for comment, David Leechiu, CEO of Leechiu Property Consultants welcomed the SC’s decision.

“This is a good decision to allow POGOs to keep on expanding. I think it’s a very good time for the property sector. The demand will come back,” he said.