MORE POGO CLOSURES SEEN

Online gaming operators in the country may take their business elsewhere if disputes with tax authorities are not resolved soon, according to the government agency in charge of regulating these companies.

The Philippine Amusement and Gaming Corp. (Pagcor) raised the issue after the Macau-based Suncity Group, the world’s largest junket operator, closed down its Philippine offshore gaming operators (Pogo) unit.

A second company, Don Tencess Asian Solutions, has informed Pagcor that it intends to close shop as well, said Jose Tria, offshore gaming licensing chief of the regulator .

“There are other companies that also plan to cancel their licenses, but I haven’t received their official letters so I can’t name them yet,” Tria said.

‘Let them go’

Aside from Pogo licensees, 13 service providers offering call center operations, telemarketing, systems and hardware support, live dealer video streaming and other online games have also closed down.

Some senators on Monday said the government should be glad about the looming exodus of Pogos over their refusal to pay taxes.

“That’s good news. Let them go,” Senate Minority Leader Franklin Drilon said in a Viber message.

“Our tax laws are clear: Pogos should pay franchise and withholding taxes. They should settle their P50 billion (in) unpaid taxes,” Drilon said.

At the core of the industry’s problems are tax liabilities that are preventing the reopening of Pogos, which were closed down en masse during the imposition of the Luzon lockdown in March to fight the spread of the new coronavirus.

BIR clearance

The government has allowed some online gaming companies to resume partial operations, but many are still unable to reopen due to unpaid taxes being levied by the Bureau of Internal Revenue (BIR), which is attached to the Department of Finance (DOF).

In particular, many Pogo operations have yet to secure a tax clearance from the BIR, which requires foreign-based online casino licensees to pay an additional franchise tax, including arrears, on top of franchise fees paid to Pagcor.

Finance Secretary Carlos Dominguez III said on Monday that some Pogos might leave the Philippines but the BIR would still collect taxes due the government.

Local licensee

“One of the Pogos mentioned, Don Tencess Asian Services Solution Inc., is a local licensee and already paying franchise tax. It will be subjected to investigation before it will be given clearance to close by the BIR,” Dominguez said.

As for SC World Development Group Ltd., Dominguez said it was an offshore licensee and “not registered with the BIR.”

“We still intend to go after its tax dues,” Dominguez said, referring to the unit of Suncity Group that Pagcor said had already closed down its Philippine operations.

As of early this year, about 60 Pogos had been issued licenses to operate by Pagcor, while 218 service providers employing more than 108,000 foreigners had registered with the BIR.

Pogo licensees tap service providers to be the ones that actually communicate with their clients—online gamblers outside the Philippines, mostly in China.

Some of the licensees based overseas are contesting the imposition of the BIR franchise tax, saying they are not covered by it as they have no physical presence in the country.

This standoff worries Pagcor chair and CEO Andrea Domingo, who noted that more Pogos are set to close down, potentially affecting over 30,000 Filipinos employed in the industry.

Public criticism

Tria said the spate of closures and Pogo departures was being aggravated by government tax levies and the rising costs associated with their inability to resume operations.

“There are other jurisdictions that have opened up offering better tax rates and friendlier environment,” he said, adding that some operators were also being affected adversely by criticism from the public.

The Pagcor official said the gaming regulator was working with the industry to facilitate the resumption of operations in accordance with the law. But he added that the franchise tax dispute with the BIR was beyond the ambit of Pagcor and might have to be resolved by the court.

P20B in taxes a year

Last week, Dominguez said the DOF had estimated that up to P20 billion a year in corporate and personal income taxes could be generated from Pogos.

The government collected P6.4 billion in additional taxes last year as it ran after tax-deficient Pogos. Before, tax collection from the Pogo industry had reached only about P1 billion per year.

Some errant Pogos did not remit their foreign workers’ withholding income taxes, while others did not pay corporate and franchise taxes.

Drilon said Pagcor should not try to convince the Chinese-owned online gambling businesses to stay put since the country had nothing to lose with their impending exit.

Instead, he said, the BIR should immediately close down tax-delinquent Pogos as mandated by law and its own rules.

“Pagcor should stop playing a lover to Pogos. It should abandon any effort to woo them back,” he said.

Sen. Joel Villanueva, who first exposed the multibillion-peso tax liabilities of Pogos, said the gambling operators must still settle their tax liabilities before leaving the country.

‘Good riddance’

“Good riddance,” Villanueva said of the Pogos, which started to mushroom in the country under the Duterte administration.

“They will not be a loss to the Philippine economy. We should attract companies that invest in (the) Filipino people,” he added.

Sen. Risa Hontoveros challenged Pagcor to flex its regulatory muscles and “come down hard” on Pogos for its stubbornness in avoiding the payment of franchise, income and withholding taxes.