PAGCOR failed to remit P15B to national treasury — COA report

The Philippine Amusement and Gaming Corporation (PAGCOR) owes the government P15.401 billion of income as a result of under-remittances from 2011 to 2015, the Commission on Audit (COA) said in its latest report.
 
In a 2015 annual audit report of state-run PAGCOR, the commission said that for 2011 to 2015 the gaming regulator should have remitted to the Bureau of Treasury (BTr) P98.521 billion representing the government’s 50-percent share from its total earnings.

PAGCOR was able to remit only P72.599 billion “resulting in deficient remittance totaling P25.962 billion,” the commission said.
 
The COA, however, was quick to clarify that for the same period, PAGCOR also had an over remittance of P10.561 billion.
 
“Re-computation, however, disclosed an over-remittance of the 50-percent cash dividend remitted by PAGCOR to the BTr during the same years pursuant to Section 3 of RA 7656 in the total amount of P10.561 billion, bringing the net under-remittance to P15.401 billion,” the COA report read.
 
The commission blamed PAGCOR’s wrong interpretation of the law for the under-remittance.
 
It pointed out that Section 12 of Presidential Decree 1869 provides that after deducting the 5-percent franchise tax, the government must have a 50 percent share of PAGCOR’s “aggregate gross earnings” to fund the government’s infrastructure and socio-economic projects within Metro Manila.

Gross earnings vs. gaming revenues
 
But PAGCOR computed the government’s 50-percent share based on its income from gaming operations only and not on the corporation’s total earnings, the commission said.
 
“Because they believed that ‘aggregate gross earnings’ pertained to gaming revenues only,” the report read.
 
The COA maintained it had earlier clarified in a memorandum that “gross earnings” refer to the entire earnings of a corporation.
 
“The Office of the General Counsel, Legal Services Sector of this Commission, clarified in its Memorandum dated June 29, 2015 that jurisprudence dictates that when we speak of the ‘gross earnings’, we mean the entire earnings or receipts of such person or corporation from the business or operation to which we refer,” the commission said.
 
The regulator does not have the authority to assume that it only pertains to its income from gaming operations since PD 1869 did not make any distinction as to what constitutes aggregate gross earnings, the commission noted.

“And since the law does not distinguish as to what constitutes the aggregate gross earnings, PAGCOR lacks the authority to make any distinctions and must construe the words in its general sense consistent with the principle Ubilex non distinguish necnos distinguire debemos, or ‘where the law does not distinguish, neither do we distinguish’,” the report read.
 
“Therefore, the aggregate gross earnings of PAGCOR, from which the 50 percent government share shall be computed, should not only mean income from gaming revenues but should include income from other related services as well,” it added.

PD 1869
 
In a reply to the audit report the PAGCOR management maintained that it “correctly remitted the 50 percent national government (NG) share based on what is provided under PD 1869...
 
“Section 12 of PD 1869 provides that the 50 percent NG share shall be computed based on the aggregate gross earnings of PAGCOR from the franchise which refers to PAGCOR’s gaming operations,” the PAGCOR management said.
 
“Since PAGCOR’s franchise refers to the operation of casinos and other gaming activities, it legally and logically follows that the 50 percent NG share should be based on PAGCOR’s income from gaming operations authorized by its franchise,” it added.
 
Section 12 of PD 1869 titled “Franchise and Powers of Philippine Amusement and Gaming Corporation” reads as follows:
 
“After deducting five (5%) percent as Franchise Tax, the Fifty (50%) percent share of the Government in the aggregate gross earnings of the Corporation from this Franchise shall be immediately set aside and allocated to fund the following infrastructure and socio-civil projects within the Metropolitan Manila Area: (a) Flood Control (b) Sewerage and Sewage (c) Nutritional Control (d) Population Control (e) Tulungan ng Bayan Centers (f) Beautification (g) Kilusang Kabuhayan at Kaunlaran (KKK) projects.”
 
In its rejoinder, the COA, however, maintained its original position and ordered PAGCOR to pay the government P15.401 billion.
 
“We stand firm with our stance that aggregate gross earnings pertained to the totality of the income from gaming revenues and income from other related services,” the COA said.
 
“We recommended that Management cause the remittance of the total amount of P15.401 billion to the BTr, representing under-remittance of the 50 percent government share for CYs 2011 to 2015 in accordance with PD 1869… Thereafter, computation of the 50 percent government share should be based on the entire income of PAGCOR, not only income from gaming revenues,” it added. — VDS, GMA News