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‘Marites-driven policymaking:’ Salceda takes PAGCOR to task for statement that POGO tax law to blame for low tax collections; House tax chair says property data show rising POGO office space take up, BIR say tax collections on offshore gaming are rebounding this year

September 11th, 2022

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) slammed the statement of the Philippine Amusement and Gaming Corporation (PAGCOR) in yesterday’s budget briefing with the House of Representatives which blamed Republic Act No. 11590, or the POGO Tax Regime, principally authored and sponsored by Salceda, as the reason for low tax collections from offshore gaming.

“I understand because of the high gaming tax of the POGO,” Juanito Sanosa Jr., Pagcor president and chief operating officer said during the briefing yesterday.

In response, Salceda said today that “blaming a tax law that was only fully implemented in December 2021 for low tax collections, when all evidence points to a POGO revival by the later quarters is bizarre to say the least.”

“I can’t believe that people will use one quarter of performance of a tax law as basis for amendments. Doesn’t that look a little too agenda-driven rather than evidence-driven? It’s Marites-driven policymaking.” Salceda said, making use of common Filipino lingo for gossipers.

Salceda pointed to property market data which shows that offshore gaming is due for a recovery in the succeeding quarters of the year.

“According to property market expert Leechiu Consultants, there were 21 thousand square meters of new POGO office space leased by around Q2 of 2022. That means the POGOs have adjusted to our laws already, and they are now more comfortable with our regulatory regime. That’s what regulatory certainty does,” Salceda said.

“And because they are now taxed fairly, they are regulated well, and we imposed transparency standards on the sector, they are no longer stigmatized as much. Because of that, office leases for POGOs are up starting May, and we will likely see the tax consequence of that development by Q2 or Q3 of this year.”

“On the other hand, if you look at the POGO transactions for office space during the height of COVID-19 from Q2 2020 to Q4 2022, you will see that almost zero new office space was leased by POGOs. That should explain revenue performance. So that’s the cause, not RA 11590, which gave them more solid footing.”

“Property data shows recovery. BIR Commissioner Lilia Guillermo also said they are seeing POGO tax revenues pick up. Tax policy takes time to work, and China is still in zero-COVID policy, which was not anticipated. But, our tax authorities and our property sector data is already showing recovery. So, why change the law, especially this early?”

Salceda also emphasized that RA 11590 “corrected an unfair and obnoxious tax rate which was suddenly inserted in Bayanihan 2 without prior consideration of the Committee on Ways and Means, and which was correctly assailed as constitutionally impaired.”

“And what happened during those dates when no POGO was leasing any office space? One, of course the pandemic slowed down the market, especially since China adopted very stringent lockdowns. Two, in Bayanihan 2, some legislators inserted a provision that taxed POGOs at 5% of gross bets, which are not sales, instead of 5% of revenues. The Bayanihan 2 POGO tax was going to tax them 20 times the standard tax rate for casinos. So, that insertion was deemed egregious and was eventually halted by the Supreme Court.”

“And mind you, that insertion did not pass through my Committee, the committee on ways and means, where tax policy is constitutionally mandated to originate. So, there are legitimate concerns about the constitutionality of that insertion.”

“What RA 11590 did was to correct that policy misjudgment by imposing a tax rate that aligns with global standards and our own rates on casinos. RA 11590 went through the process, and was supported strongly by President Duterte and the Department of Finance. Pantay lang kumbaga sa kung ano ang meron na tayo.”

“I don’t know what PAGCOR was saying about making our tax rates more competitive for POGOs. What are we going to do? Will I tell local casinos like Solaire, Resorts World, and Okada that actually, we will tax POGOs at a lower rate than we tax them, because we are trying to promote POGOs as an economic sector? Are we supposed to adopt a policy of promoting POGOs as a business sector? Allow them as a regulated sector, yes. Tax them fairly, yes. Promote them with lower tax rates than domestic counterparts? That’s absurd.”

“I’m committed to helping PAGCOR recover and become a stronger institution. I’m already helping them out with their privatization of casinos. I’ve defended them and their regulatory functions. And I’m glad the new Chairman, Al Tengco, was quick to disclaim that he just started on the job so he has to check the data, rather than coming so quick to an unfounded conclusion like Sanosa did. I take serious offense, because unfounded assertions by government officials can lead to bad policy.”

“By all means, I will study any new proposal to amend the law, as is my duty as tax chairman of the House. But I will NOT suffer foolish statements on tax policy gladly,” Salceda said.

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