Inside Asian Gaming

29 In Focus of RA 7656. The Office of the President referred the letter to the Department of Finance.” The fact that Pagcor appears in these documents to be conducting negotiations over its tax liabilities direct with the President of the Republic must raise questions about its potential exposure to hostile regulatory action by politicians in the country’s Senate. Give and take Experts on tax law and tax compliance would no doubt point out there’s generally more room for negotiation between governments and big corporations over tax payment than there is between governments and average individuals. In other words, governments always push corporations to pay more, and companies return the favour by seeking loopholes and favoured status. In that respect, Pagcor may only be doing what businesses across the world try every day. The difficulty for investors in Philippines gaming projects is the current relative lack of transparency in relation to Pagcor’s tax liabilities. It makes it difficult to anticipate what Pagcor’s tax liability will be in a year or 18 months’ time and whether any new liabilities as established by the courts or the legislature will be passed on to the investors. Perhaps the most damning revelation of all made by the Commission on Audit team when looking at Pagcor’s books for 2007 was an admission by Pagcor that if accounting standards recommended by the Commission were adopted, it would mean a halving of Pagcor’s previously stated net income for the year. “Recasting Pagcor’s 2007 Statement of Income and Expenses based on CoA’s position on what constitutes gross earnings will result in a 52.39% decline in Pagcor’s net income and a cash loss of PHP776,703,081.91 [US$16.3 million]. In any case, pending final resolution of the cases before the Supreme Court there can be no definitive finding on the matter, with Pagcor, CoA and the Department of Finance/Bureau of Internal Revenue (BIR) having different positions on the issue.” Worries This kind of regulatory uncertainty would probably get the due diligence teams of most foreign investors reaching for a bottle of strong liquor. Time will tell whether sufficient safeguards and rigour can be injected into the system to turn investment in the Philippines’ new generation of casino resorts from a wild card play to a blue chip investment. MikioTanji of ARUZE is upbeat though about the prospects of the Manila projects. “Our aim in Manila is to try to reach the best and the most sophisticated customer all over the world here in Manila Bay,” he says. “Although we are a shareholder in Wynn Resorts we would like to surpass Wynn Resorts. We would like to combine the hospitality people here in the Philippines with Japanese sense of service and design. I think we can achieve this.”