The owner of the Solaire Resort and Casino in Manila has petitioned the Philippine Supreme Court to rescind the new 30% income tax imposed on casinos by the country’s Bureau of Internal Revenue (BIR). Bloomberry Resorts and Hotels Inc. (BRHI), which launched Solaire a year ago, has accused the BIR of violating Philippine law by overriding the charter of the Philippine Amusement and Gaming Corporation (PAGCOR), which was specifically exempted from income tax under the National Internal Revenue Code (NIRC).
The BIR shocked casino operators a year ago by announcing it was removing PAGCOR’s tax exemption, meaning PAGCOR licensees were also subject to the 30% tax burden. Casino operators felt they were the victims of a bait-and-switch, having agreed years ago to invest billions of dollars in their Entertainment City projects based on their expectation of enjoying a maximum 5% franchise tax. PAGCOR has since attempted to mollify casino operators by reducing gaming license fees by 10% but that still leaves operators facing significant increases.
Bloomberry says the BIR’s proposal is “unlawful and unwarranted” and appears intent on “crippling the gaming industry vis-à-vis the ability to compete with established gaming markets such as Macau and Singapore.” Fitch Ratings recently expressed pessimism regarding the Philippines’ ability to compete given its lack of infrastructure and “the possibility of sudden policy changes.” (Ahem.)
BRHI noted that the BIR edict rescinding PAGCOR’s exemption didn’t specifically extend to the regulator’s licensees. BRHI further argues that BIR overstepped its mandate because “administrative issuances must not override, supplant or modify the law … Only Congress can repeal or amend the law.” As such, BRHI is seeking a temporary injunction blocking the BIR from implementing its new casino tax while the Supreme Court considers BRHI’s petition.
In response to BRHI’s petition, BIR commissioner Kim Jacinto-Henares told Business World Online that its official position was that its edict “merely implements the decision of [the Supreme Court] and therefore the petition is really questioning a final decision” of the Court.