The chair of the Philippines’ Senate Ways and Means Committee, Pia Cayetano, has described a proposed 5% tax on all Philippine Offshore Gaming Operators (POGO) licensees as essential to prevent them and their employees from skipping their tax obligations.
The 5% tax, which passed through the House of Representatives in February, is currently up for plenary debate in the senate after the Supreme Court placed a temporary restraining order (TRO) on its application in January. The TRO had followed opposition from POGOs amid claims that increased costs and lower business volumes due to COVID-19 were responsible for a decline in the number of licensed POGOs resuming operations.
However, Cayetano said the tax was important to prevent POGOs from claiming they are not liable to pay taxes in the Philippines, or that employees are also exempt based on their place of residency.
“This bill now clarifies that all offshore gaming licensees, regardless of whether Philippine or foreign-based, are considered [to be] doing business in the Philippines, and must pay 5% gaming tax on the gross gaming revenue or receipts derived from their gaming operations,” she said, as reported by local news outlet GMA. “This gaming tax will be in lieu of all taxes.”
Under the proposed tax, licensed POGOs will pay a gaming tax of 5% on gross gaming revenues and POGO workers earning Php600,000 or more a 25% withholding tax. A minimum monthly withholding tax of Php12,500 will be applied to all POGO workers to prevent salaries being wrongly declared.
“As clearly stated in the bill, 25% final withholding tax based on gross income will be imposed on an alien individual, regardless of residency in the Philippines, term, and type of visa,” Cayetano said.
Accredited POGO service providers – those providing online gaming operations under the license of a POGO – won’t pay any gaming taxes but will be liable other local and national taxes.
The imposition of a 5% gaming tax on POGOs will replace other taxes such as franchise taxes, levies and fees.
The new taxation scheme is expected to raise additional annual revenues of around Php45 billion (US$935 million).