Finance dep’t asserts taxability of POGOs despite OSG opinion

THE Department of Finance (DoF) said it maintains that earnings of Philippine Offshore Gaming Operators (POGO) are taxable, contrary to statements issued by the Office of the Solicitor General.

Finance Secretary Carlos G. Dominguez III said that according the Bureau of the Internal Revenue (BIR), a taxpayer’s income can be taxed where the service is rendered, making an offshore gaming firm operating in the Philippines subject to Philippine income tax.

POGOs typically take bets from Mainland clients, where they can also enforce collection on clients who suffer from losses.

“The BIR issued an opinion to this effect months ago saying that the situs of income is where the services are rendered,” Mr. Dominguez told reporters in a phone message.

He also reiterated that BIR is the agency authorized to interpret the provisions of the Tax Code.

“The same is true for VAT (value-added tax), which also is imposed on services rendered in the Philippines,” he added.

The Philippine Star reported on Monday that Solicitor General Jose C. Calida wrote to the Philippine Amusement and Gaming Corp. (PAGCOR) and the BIR, saying that POGOs cannot be taxed here based on the “source of income” principle.

Mr. Calida, according to the report, argued that even though POGOs are based in the Philippines, the bets are taken outside the Philippines.

Representative Jose Ma. Clemente S. Salceda of Albay’s second district said Mr. Calida’s letter “rises to the level of (granting) a tax exemption,” which he said is a power reserved for Congress.

“There is value added or income derived here, therefore taxable. Basic accounting principle — costs are recognized when revenues are recognized. So aren’t the wages here costs expensed by POGOs,” Mr. Salceda said in a statement yesterday.

Currently, POGOs must pay a 5% franchise tax as per BIR’s revenue memorandum circular 102-2017 issued in December 2017.

According to PAGCOR Chairperson and CEO Andrea D. Domingo, Congress should pass a new law clearly defining the POGOs’ tax obligations.

“In absence of any clear law covering the taxability of the income of the offshore-based POGO operators, then the opinion of the OSG (Office Solicitor General) would be prevailing. But of course, if Congress (could pass) a law clearly providing for the tax accountabilities of POGO operators,” Ms. Domingo told reporters in a phone message Monday.

The DoF has been pressing the industry to withhold and remit personal income taxes of workers employed by POGOs and has shut down several non-compliant POGOs and service providers. — Beatrice M. Laforga