House may adopt Senate Pogo tax bill

THE House of Representatives is amenable to adopting the Senate-approved version of the fiscal regime for Philippine Offshore Gaming Operations (Pogo), which will raise P176.9 billion in government revenue in five years.

House Committee on Ways and Means Chairman Joey Sarte Salceda of Albay said Speaker Lord Allan Velasco approved the recommendation of his panel to adopt the Senate Bill 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 said.

Once we adopt it, there will be no need for a bicameral conference committee. SONA [State of the Nation Address] happens on Monday. We can send President Duterte a bill to sign by Tuesday’s session,” Salceda added. Congress will open its third and last regular session on July 26.

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

“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.

“Last Monday, 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.

The lawmaker said both versions impose a 5-percent tax on gross gaming receipts for “offshore gaming licensees” and a 25-percent 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-percent 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-percent 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, (which) uses gross receipts or commissions, the equivalent of GGR, as its tax base],” Salceda said.

The bills also impose a final tax of 25 percent 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 nongaming income is to be taxed at 25 percent of taxable income, akin to regular corporations.

Service providers

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 businessprocess 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 added that both bills allow 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 Corp. (Pagcor) can collect regulatory fees from the OGLS, provided that such fees shall not exceed 2 percent 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.