Court of Tax Appeals affirms denial of gaming firm’s refund

THE Court of Tax Appeals (CTA) affirmed the denial of the tax refund claim of a junket gaming operator over the corporate income tax it paid worth P24.4 million for 2014.

In a 10-page ruling dated Jan. 8, the court, sitting en banc, denied for lack of merit the petition of Prime Investment Korea, Inc. that sought to nullify the 2019 ruling of the special second division, which denied the refund claim.

The firm claimed that junket gaming revenues are not subject to corporate income tax and as contractee/licensee, the tax exemption of Philippine Amusement and Gaming Corp. (PAGCOR) extends to its gaming operations, essential services, and technical services.

The operator also claimed that contractees and licensees are “liable only for 5% franchise tax in lieu of all kinds of taxes, including corporate income tax” and the classification of income from junket gaming operations as “other related operations” is erroneous and inconsistent with Presidential Decree No. 1869 on the franchise of PAGCOR.

The Bureau of Internal Revenue, on the other hand, said that the claim of Prime Investment Korea that it is exempt from corporate income tax has no legal basis and contractees should pay the said tax for income derived from junket operations.

“Petitioner’s arguments are mere rehash of its case before the Court in Division. We find no cogent reason to deviate from the Court in Division’s disquisitions,” the court said.

Citing a Supreme Court decision, the court noted that PAGCOR’s income is classified into two: first is income from operations and licensing gambling casinos, clubs, and similar places, and second is from “other related operations.”

It said that income from junket operations, which is classified under “other related services,” is subject to corporate income tax and not franchise tax.

The CTA also said that it had “consistently” ruled that income from junket operations is classified as “other related services” that is subject to corporate income tax, noting the decision of its division.

It also cited a jurisprudence, which ruled that as PAGCOR is subject to corporate income tax for other related services, “contractees and licensees” should also pay the same tax for income from such related services.

“The language of the law is too plain and unambiguous to be construed. It is a basic tenet in statutory construction that when the statute is clear, it must be given its literal meaning and applied without any attempted interpretation,” it ruled.

“Considering that petitioner’s income from junket operations is subject to corporate income tax, its claim for refund or issuance of TCC (tax credit certificate) arising from alleged erroneous payment of taxes has no legal mooring. Accordingly, We affirm that petitioner is not entitled to the refund or issuance of TCC for the taxes paid for TY 2014,” it added. — Vann Marlo M. Villegas