The Philippine Amusement and Gaming Corporation’s (PAGCOR) tax issues in the Philippines aren’t over yet. Now, the Philippine senate is getting involved.
Senator Joseph Victor “JV” Ejercito has proposed an inquiry into the issue. Ejercito pointed out the possibility of any collusion between PAGCOR and the four casino operators in Entertainment City to circumvent the memorandum circular passed by the Bureau of Internal Revenue.
Last year, BIR passed Memorandum Circular 33-2013, holding PAGCOR’s licensees liable to pay 30% in corporate income taxes on their net taxable income. That was a huge difference from the initially agreed-upon 5% franchise tax on gross gaming revenue between PAGCOR and the licensees.
Senator Ejercito filed Senate Resolution 860 to look into the matter after claiming that the agreement between PAGCOR and its licensees has already resulted in monthly losses amounting to Php300 million (close to $7 million) per month since last April.
“Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need,” the senator said, as quoted by The Manila Times.
Under the original structure of PAGCOR’s deal with these licensees, the casinos were supposed to pay PAGCOR 25% of gross gaming revenue from regular tables, slot machines, other gaming machines, and another 15% for high-roller tables and junket operations. However, since the BIR passed the memorandum, PAGCOR lowered the fees to 15% and 5%, respectively.
PAGCOR continues to maintain its position that the reduction of licenses fees falls in line with a provision in the licensees’ respective Provisional Licenses.
Article IV, Section 20 of the provision indicates that license fees paid to PAGCOR are “in lieu of all taxes”, which means that a casino licensee is only liable to increase in franchise tax instead of income tax, which the BIR imposed in its memorandum.
So far, there is still no indication on whether Senator Ejercito’s filing of SR 860 will lead to a senate committee being created to look into the issue.