Tax take down as POGO workers flee COVID-19

by Ben O. de Vera, Philippine Daily Inquirer, 21 Sep 2020

MANILA, Philippines — The government’s tax collection from the overseas gambling business is falling as operators close shop and their mostly Chinese workers are fleeing the new coronavirus in the Philippines, the country worst hit by the COVID-19 pathogen in Southeast Asia.

A Bureau of Internal Revenue (BIR) official told the Inquirer on Friday that the agency was conscientiously collecting the tax obligations of the so-called Philippine offshore gaming operators (Pogos), service providers and their employees.

But recent collections were lower compared with collections before the coronavirus pandemic, said Revenue Deputy Commissioner Arnel Guballa.

Actual figures, however, were not yet available, he said.

Fear of COVID-19

“The issue is still the same, Pogos are closing down, because they are afraid of COVID-19,” said Guballa, who heads the BIR’s Pogo task force.

“Plenty of Chinese workers’ visas were canceled and they went back to China because there are plenty of COVID-19-positive cases in the Philippines,” he said.

The website of the state-run Philippine Amusement and Gaming Corp. (Pagcor), which regulates the Pogo industry, had listed 55 registered operators as of Sept. 8, down from 60 at the start of the year.

Among the licensed Pogos, only 29 had been issued authorization to resume operations as of Sept. 8, Pagcor data showed.

Earlier, the agency announced that a couple of Pogos closed down and left the Philippines due to problems with taxation.

In May, when the government began to ease coronavirus lockdowns and decreed minimum health standards, the BIR issued rules requiring Pogos and their service providers to first pay their tax dues before they could resume operations.

A number of Pogos based outside the Philippines contested the BIR requirement, especially the 5-percent franchise tax, which they claimed covered only gaming operators located in the country.

Pagcor data do not show how many overseas Pogos there are.

In July, the BIR reiterated that revenue rules it issued in 2017 imposed a franchise tax on all Pogos, whether here or overseas.

Revenue Commissioner Caesar Dulay said at the time that “Pogo licensees or operators are not being assessed nor paying income tax and other taxes because the BIR’s RMC 102-2017 clearly states that in lieu of such taxes, they are only subject to the franchise tax.”

“Only Pogo service providers are subject to the regular taxes, such as income and value-added tax (VAT). However, both Pogo operators and service providers whose employees earn compensation income need to withhold and remit the taxes due from them,” Dulay said.

“Revenue rules provide that the foreign nationals compensation income shall be withheld 25-percent final withholding tax. However, instead of remitting the final withholding tax, the majority are only remitting the withholding tax on compensation, which is based on lower rates depending on each employee’s total amount of income,” he said.

Licensees employ service providers in the Philippines whose workers directly deal with their clients, online gamblers abroad, mainly in China, where gambling is illegal.

Latest Pagcor data showed that as of Sept. 8, 99 accredited local gaming agents and service providers had been allowed to resume operations.

Before the coronavirus outbreak, there were up to 218 service providers employing about 130,000 to 150,000 people, at least three-fourths of whom were foreigners, mostly Chinese.

Requirements eased

The BIR later eased some tax requirements before Pogos could resume their operations.

In June, Finance Secretary Carlos Dominguez III said as much as P20 billion in corporate and personal income taxes could be collected from Pogos every year.

An intensified BIR campaign against tax-evading Pogos resulted in P6.4 billion in tax collections from the industry last year.

Before 2019, tax revenue from the Pogo sector amounted to only about P1 billion a year, Dominguez said.