SC: Pagcor's gaming income still exempt from corporate tax

The Supreme Court has ruled that the Philippine Gaming Corp's income from its gaming operations can only be subjected to 5-percent franchise tax, and not to a corporate income tax.

 

In a 14-page ruling, the SC added that only Pagcor's income from other related services can be subjected to a corporate income tax.

 

The ruling was in response to a motion filed by Pagcor, seeking clarifications on the high court's ruling on March 15, 2011 which declared the corporation's tax liability in view of the withdrawal of its tax privilege under Republic Act 9337 or the law that amended portions of the National Internal Revenue Code of 1997.

 

In its latest ruling, the SC admitted it originally made no distinction as to which income is subject to corporate income tax, since the issue raised in the original case concerned only the constitutionality of the portion of RA 9337 that excluded Pagcor from the government owned and controlled corporations exempted from corporate tax.

 

Pagcor derives its incomes from two sources: operations conducted under its franchise, and operations of other necessary and related services.

 

In its latest ruling, the high court said the Bureau of Internal Revenue committed grave abuse of discretion when it issued Revenue Memorandum Circular 33-2013, which subjects both gaming and other related services incomes of Pagcor to corporate income tax and franchise tax.

 

The SC cited Presidential Decree 1869 which exempts Pagcor's gaming operations from any kind of taxes, except the 5-percent franchise tax it is required to pay.

 

"We agree with the petitioner (Pagcor) that if the lawmakers had intended to withdraw petitioner's tax exemption of its gaming income, then... (it) should have been mentioned in the repealing clause of RA 9337," ruled the SC.

 

At the same time, the SC said: "It would be the height of injustice to impose franchise tax upon petitioner for its income from other related services without basis therefor."

 

The SC said imposing both corporate income and franchise taxes on Pagcor's gaming and other related services incomes was an "undue expansion" of the high court's original March 2011 ruling, and would "create additional burden upon petitioner (Pagcor)." — JDS, GMA News