PH court sides with E-Games casinos in legal tussle with local gov’t

e-gamesCourt cases in the Philippines take up a lot of time with some instances even stretching past years after the initial complaint was fined. But even with the inordinate length of time it takes, some cases find resolutions, as was the case involving operators of Internet casinos in the country against the local government of Quezon City.

After four years of being in limbo, the Philippines’ Court of Tax Appeals (CTA) finally affirmed a trial court ruling that essentially prohibited the government of Quezon City from imposing local tax liabilities against these betting parlors. The argument began back in 2010 when the government assessed local tax liabilities, amounting to three percent of the franchise fee based on their total gross income, as opposed to the previous agreement on assessing the taxes on the 28 percent commission these parlors receive from the gross income they remit to the Philippine Amusement and Gaming Corporation.

The QC government’s decision to change the way the system worked caught the ire of Pagcor, prompting the government-run agency to question the resolution before the Regional Trial Court in Manila. The argument, as far as Pagcor was concerned, was that the new resolution would subject its share in the gross income of these betting shops to local taxes, something the agency is exempt from doing.

According to the CTA, Pagcor isn’t required to pay the new tax system because its tax exemption extends to all taxes except corporate income tax “as it was expressly removed by Congress from it”. On top of that, the CTA also pointed out that the resolution passed by the Quezon City council had no power to impose new taxes because a resolution, as defined by Philippine law, are ” merely declarations of the sentiment or opinion of a lawmaking body on a specific matter and are temporary in nature”.

That is apparently different from an ordinance, which is defined as a local law duly enacted by the local council and according to Section 132 of the Local Government Code of 1991, an appropriate ordinance should be passed by the “Sanggunian of the local government unit “if it wants to impose a tax, fee or charge or to generate revenue under this Code”.

Through all that complicated legal talk, what’s evident after the CTA’s ruling is that the local government of Quezon City can’t just impose new tax regulations on those Internet casinos without going through the appropriate channels to do so. Chalk this one up to a win on the side of Pagcor and those E-Games shops and a lesson learned for the decision makers in Quezon City.