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POGO exodus looms as gaming firms keen to exit Philippines, says PAGCOR

Two offshore gaming companies have left the country with more seen to exit the Philippines amid tax "issues" with the government, the Philippine Amusement and Gaming Corporation (PAGCOR) said Sunday.

In a statement, PAGCOR chair and chief executive officer Andrea Domingo confirmed that Suncity, a unit of Macau's gambling giant Suncity Group, has left the country.

"Yes, Suncity has left," she said, when asked to confirm if the leading casino junket operator in Asia ceased its Philippine Offshore Gaming Operations (POGO) business.

According to Domingo, "there are others more that are leaving the Philippines", which she said will not only affect government coffers but also 30,521 Filipinos working for POGO companies.

The POGO industry was allowed to partially resume business in May, provided that they settle their unpaid taxes with the Bureau of Internal Revenue (BIR) and follow strict COVID-19 protocols.

Just last week, the Department of Finance (DOF) said it is now looking into claims that only two POGO firms have paid taxes, with Finance Secretary Carlos Dominguez III saying that the allegations are "probably true." 

The DOF in September 2019 already threatened to shut down POGOs with tax liabilities, with uncollected withholding income taxes then estimated at P21.62 billion. A number of POGOs have since been closed.

Aside from Suncity, PAGCOR said Don Tencess Asian Solutions has also officially sought for the cancellation of its license from the gaming regulator.

"I’ve heard there are other companies that also plan to cancel their licenses, but I haven't received their official letters so I can't name them yet," said PAGCOR assistant vice president for offshore gaming licensing Jose Tria.

"There are other jurisdictions that have opened up offering better tax rates and friendlier environment," Tria added, "Some [POGOs] also can no longer take the criticisms they get each day that make them feel unwelcome in our country."

Aside from POGO license holders, Tria said 13 service providers—which involves call center operations, telemarketing, systems and hardware support, as well as “live dealer” video streaming and other online games—have also closed shop.

The DOF last week said government revenues from POGOS should reach as much as P20 billion per year, but collections only reached P6 billion in 2019.

Earlier this month, the BIR said "legal issues" are hampering the collection of franchise taxes from POGOs, who claim they should not be subjected to such taxes as they are non-resident corporations.

For its part, the POGO industry—represented by the Accredited Service Providers Association of PAGCOR (ASPAP)—said its members paid the required regulatory fees and the corporate and withholding taxes of their workers.

PAGCOR defines POGO service providers as "corporations which are registered in the Philippines that provide support to the operations of licensed operators in various areas of operations including customer relations, strategic support, IT support, and gaming software platform providers and live studio and streaming providers. They are classified under Business Process Outsourcing (BPO)."

The BPO sector however, has rejected the inclusion of POGOs among its ranks.

Under the BIR Memorandum Circular 102-2017 signed by Commissioner Caesar Dulay on December 27, 2017, POGOs are mandated to pay a franchise tax equivalent to 5% of the entire gross gaming receipts/earnings or the agreed or pre-determined minimum monthly revenues/income from gaming operations, whichever is higher.

On the other hand, BPOs do not pay such franchise taxes to the government.

"We’re working on ways to allow the resumption of their operations, but you know, we can only do so much... We are regulators, we have to do everything in accordance with the law," said Tria.

"We're not tax experts. It is for POGOs to question the applicability of the franchise tax. Whatever the court decides, we follow. If they don’t want to question the tax, then they should pay it," he added.

Data released by Leechiu Property Consultants (LPC) earlier this month showed that the POGO sector accounted for 13% of office space demand from January to May this year, even with the quarantines. — BM, GMA News