The Bureau of Internal Revenue in the Philippines’ Memorandum Circular 33-2013, which clarified the income tax and franchise tax due from Pagcor and its licensees, was met with confusion and raised eyebrows from the parties on the receiving end of bigger than expected taxes. So naturally, Pagcor is stepping into the picture and has filed an appeal to the BIR to soften its 30 percent corporate income tax payments it requires from Pagcor and its licensees.
Clearly, everybody saw this one coming.
Speaking to the Philippine Star, Pagcor chairman Cristino Naguiat disclosed that he had reached out and met with BIR Commissioner Kim Henares to discuss the issue. The Pagcor chief also told the Star that his agency plans to appeal the circular and further put into question the long-standing debate on whether Pagcor is subject to pay corporate income tax. The inclusion of Pagcor in the list of agencies require to pay corporate income taxes is a pretty big deal, especially for its licensees and operators who now have to take into account the significant slice of revenues that it would send the government’s way.
The casinos in Entertainment City, in particular, are dumbfounded by the recent circular released by the BIR in large part because it was made clear to foreign investors that they were exempt from paying corporate income taxes. The understanding. at least as far as these operators are concerned, was that they were only required to pay the 5-percent franchise tax on their gross gaming revenue, as well as 15 percent gaming revenue taxes on VIP gambling and 25 percent on mass-market gambling. 30 percent in corporate income tax was out of the question, or at least that’s what they were made aware of.
But the BIR disagreed through its Memorandum Circular 33-2013, clarifying that Republic Act 9337 or the Expanded Value Added Tax Law removed Pacgor from the exempted GOCC list, thus requiring the agency to send a significant chunk of its revenue the government’s way.
For now, Pagcor is in the process of sending a formal appeal on the issue, although BIR chief Henares told the Star that her agency has not yet received any paperwork from Pagcor. Be that as it may, the BIR should expect to receive one in the coming days or weeks, possibly containing options laid out by Pagcor on how it can put the clamps on the BIR’s decision to hammer it and its operators with a hefty corporate income tax bill.