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Speaker Velasco concurs with House tax panel recommendation to adopt Senate POGO tax version

July 20th, 2021

Speaker Velasco concurs with House tax panel recommendation to adopt Senate POGO tax version; House tax committee chair says measure to raise 176.9 billion in five years

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says House Speaker Lord Allan Velasco is amenable to the House adopting the Senate-approved version of the fiscal regime for Philippine Offshore Gaming Operations (POGOs) under Senate Bill No. 2232 since “it was mostly a restatement of the House version, which is the first draft of this measure.”

“We stand to gain P13.4 billion on the first year, and P176.9 billion over five years from this measure. We expect POGO revenues to grow with more clarity in the fiscal and regulatory regime, as well as the recovery of China’s economy,” Salceda explained.

“Yesterday, the Speaker and I had extensively discussed policy reforms. One item we talked about was the POGO tax reform. I explained the differences between the House and the Senate versions. I showed that the Senate version is primarily a restatement of the House version. There are absolutely no differences in revenues raised. The tax administration provisions are slightly different, but any rough edges can be resolved by regulation,” Salceda added.

Earlier this week, Salceda wrote an aide memoire to the House leadership recommending the adoption of the POGO tax regime passed by the Senate.

“Once we adopt it, there will be no need for a bicameral conference committee. We can send it to the President for his signature the session after his SONA,” Salceda said.

“This is also the Speaker and the House leadership heeding the President’s certification of urgency of the bill. The Speaker’s style has been outcomes-based, and the Senate version’s outcomes are acceptable to us,” Salceda said.

Features

Both versions impose a 5% tax on gross gaming receipts for “offshore gaming licensees” and a 25% tax on gross income for nonresident aliens working under the Service Providers of these licensees. Both also clarify that service providers to POGOs are domestic corporations, and are thus subject to the regular national and local taxes applicable to domestic corporations.

The bills also impose a 5% tax on gross gaming receipts and revenues from other services.

“This is consistent with international practice and would not be as burdensome as the 5% tax on gross turnovers as proposed in Bayanihan 2. This is also consistent with the House’s position on taxing offsite betting activities (House Bill No. 8065, approved by the House on December 15, 2020, uses gross receipts or commissions, the equivalent of GGR, as its tax base),” Salceda wrote.
The bills also impose a final tax of 25% of gross annual income on nonresident alien employees, remitted annually to the BIR, with presumptive minimum tax base of P600,000 gross annual income. The Senate version slightly differs in style, imposing a minimum monthly tax of P12,500, which would have the same revenue consequence. The Senate version specifies that non-gaming income is to be taxed at 25% of taxable income, akin to regular corporations.

As for service providers, the bill imposes a regular corporate income tax, all applicable local and national taxes.

“The argument that service providers are akin to business process outsourcing (BPO) activities and are thus entitled to export incentives is laid to rest as the law defines OGLs as considered to be “doing business in the Philippines,” Salceda explained.

Both bills strengthen tax enforcement by ensuring that all aliens employed in OGLs, regardless of residency status, under whatever work permit they may be employed with, are covered by the taxes.

Salceda also added that both bills improve upon administration by allowing licensees to withhold the taxes of their alien employees.

Both bills also mandate the Bureau of Internal Revenue, the Bureau of Immigration, and the Department of Labor and Employment (DOLE) to jointly implement a system where they can exchange information among each other to ensure proper collection of taxes.

The versions also clarify that economic zones and the Philippine Amusement and Gaming Corporation (PAGCOR) can collect regulatory fees from the OGLs, provided that such fees shall not exceed 2% of GGR, or a minimum guaranteed fee, whichever is higher.

“This addresses the concern that a fiscal regime directly under the national government will drain PAGCOR and the economic zones where OGLs are located of a revenue stream,” Salceda said.

“All in all, both versions are strong on administration and tax generation. SONA happens on Monday. We can send President Duterte a bill to sign by Tuesday’s session,” Salceda added.

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