BIR bucks redistribution of 5% Pagcor tax

The Bureau of Internal Revenue (BIR) is opposing the proposal of the Philippine Amusement and Gaming Corp. (Pagcor) to realign the five percent franchise tax as lawmakers move to increase the share of local governments hosting the latter’s operations.

In a recent hearing of the House of Representatives Committee on Games and Amusements, BIR representative and lawyer Ralbert Tibayan said the revenue agency is not amenable to Pagcor’s suggestion of redistributing the franchise tax.

Pagcor wants three percent of the five percent franchise tax to go to the national government through the BIR and the remaining two percent to LGUs hosting Pagcor casinos.

Currently, the entire five percent franchise tax is remitted to the BIR.

This was after lawmakers suggested that host cities receive a five percent share of the total gross revenue generated from Pagcor’s regulated and operated activities. Local government units are only receiving less than one percent of the total revenue.

“We oppose the suggestion of Pagcor, two percent is a huge part of the pie and our collection will decrease,” Tibayan said.

It should be noted that Pagcor’s income from its operation and licensing of gambling casinos and other operations is subject to a five percent franchise tax, on top of other direct and indirect taxes.

Last year, P2.75 billion in franchise tax was remitted to the BIR. Host cities, on the other hand, received 0.76 percent of the total income at P451.72 million.

If the franchise tax will be redistributed, host LGUs will get P1.1 billion and the BIR’s take will be reduced to P1.65 billion based on the 2022 franchise tax of five percent.

Pagcor president and COO Juanito Sanosa said the gaming agency’s proposal for redistribution is modeled after the economic zones’ laws.

“We will respect whatever the body will pass but we just want to present that many of those presently distributed by Pagcor will be hit,” Sanosa said.

As mandated by law, Pagcor is tasked to provide portions of its earnings to the BIR, Bureau of the Treasury, the Philippine Sports Commission, as well as for the implementation of vital laws such as the Early Childhood Care and Development program, the Sports Incentives and Benefits Act, the National Cultural Heritage Act, and the Renewable Energy Act.

“This is aside from the fact that there are pending bills that are requiring (resources) directly from Pagcor,” he said.

One of which is the proposed Maharlika Investment Fund where Pagcor is expected to infuse 10 percent of its gross gaming revenue, alongside investments from government financial institutions, the central bank, and from royalties, among others.