Fifty shades of truth

The recent announcement and position taken by the Solicitor General Joe Calida that the Philippines cannot collect taxes on Philippine Offshore Gaming Operators or POGOs had many of us convinced that the Duterte administration and PAGCOR committed a monumental blunder in providing safe haven for gambling operations intended to circumvent Chinese authorities and laws. It is important to note that when the Office of the Solicitor General declares its legal opinion it is assumed that the opinion was done with due diligence, mastery of the law and wide ranging consultation of legal experts. Now comes Solicitor General Joe Calida saying we can’t tax profits that were earned or created abroad because you can only tax money or profit made here in the Philippines.

Fortunately, Solicitor General Calida is not the Supreme Court, not a one man Congress and not Rodrigo Duterte who usually gets what he wants. In fact, after reflecting on the views expressed by the Solicitor General and referencing his opinion to actual business practice, I was reminded that he is a “lawyer”, glorified perhaps as SolGen, but still a “lawyer” nonetheless. His opinion is just the opinion of one lawyer. As most lawyers go, it is their job or choice to take a position dictated by their client or a case they have taken on. It’s their job to come up with a position, evidence and strategy to argue the validity of their case or cause whether it’s right or wrong. It’s not personal; it’s their job. They may or may not believe in what they are fighting for but as lawyers they must argue and defend their position to the end. I believe that SolGen Calida believes in the position he has taken, but I am certain that there would be many more lawyers who would debate and argue against him.

That would be an interesting event to watch if SolGen Calida could guest on our TV program AGENDA because we would all benefit from learning about the law and how lawyers use laws and different truths to defend their position. In any case, the position taken by the Solicitor General will probably be praised by PAGCOR officials who have collected billions of pesos from POGO operations, but hissed at by the Department of Finance particularly the BIR who’ve been wanting to collect their pound of flesh from the POGOs. Ultimately, the big question is who’s will be done? Will it be the legal opinion of Jose Calida or will it be the almighty and influential economic team led by the most powerful man in the Cabinet, Secretary Sonny Dominguez?

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Aside from lawyers, laws and their “Fifty Shades of Truth”, some exporters argue that Calida’s argument is flawed. One pointed out that local manufacturers who export and “sell” their products abroad only has a sale once their deliveries are accepted by the foreign buyer / company. So technically speaking the transactions are “closed” abroad. Even if orders were made in the Philippines, manufactured in the Philippines and shipped from the Philippines, it only becomes a sale when the “buyer” accepts the goods abroad. I think SolGen Calida was pointing out that the payments were made by electronic gamblers to an operator presumably based outside the Philippines. But that is an imperfect argument because the electronic gambler transacted with (gambled against) POGO hosts and equipment that are all located in the Philippines. The payments are secondary to the fact that the gamblers “dealt” or transacted with POGOs here.

The suggestion that you can’t collect taxes on the transaction between gamblers and operators abroad is somewhat limp because even developed countries such as the United States as well as European states have gone after their citizens who worked and earned incomes abroad but did not pay taxes in their countries of origin. The only way out of a tax audit is to show proof that you paid taxes abroad. The only added burden to the US government I know of is the fact that they have had to lobby with local authorities to get the cooperation of local banks to require foreign depositors to fill up forms or register themselves as non-residents or foreign citizens in order to track them for tax purposes. Unfortunately it would be difficult to get the cooperation of the People’s Republic of China because their local representation has strongly protested the Philippines’ open door policy for POGO because the operators target Chinese nationals to engage in an illegal and therefore criminal activity (gambling), gives shelter to invisible business operators who undermine the Chinese economy and are active tax evaders.

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I don’t know how the various government officials involved will settle the matter, but judging from all the challenges and problems that have come up because of POGO, the current administration is either blind or ignoring “the handwriting on the wall.” POGO may earn billions of pesos but it also traps and ruins hundreds if not thousands of Chinese families in the curse and ruin of gambling. If POGO places financial curses on their victims, it would be stupid on the part of our leaders to ignore and dismiss that.  If you curse others knowingly, the same curse will return to you tenfold. Just consider the fact that most, if not all the big and respected business leaders and conglomerates in the Philippines, do not engage in any sort of gambling business. They avoid it like the plague because they know it’s bad for business and bad for society. Sooner or later, the government’s luck will run out on this bad business choice but it will be the entire country that will suffer divine retribution or what we all call “Karma.”

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