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Palace: Gov’t can impose taxes on POGOs

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By Genalyn Kabiling

Insisting that the State cannot be denied of its right to collect taxes, Malacañang declared on Tuesday that the government can impose taxes on the offshore gaming firms in the country.

Presidential Spokesperson Salvador Panelo (PCOO / FILE PHOTO / MANILA BULLETIN)

Presidential Spokesperson Salvador Panelo (PCOO / FILE PHOTO / MANILA BULLETIN)

Presidential spokesman Salvador Panelo said the government would neither be “stymied” nor “stopped’ by technicalities in collecting applicable taxes from entities or individuals.

Panelo, also Chief Presidential Legal Counsel, issued the statement following the contradicting statements of the Department of Finance (DOF) and Office of the Solicitor General (OSG) on the taxability of the Philippine Offshore Gaming Operators (POGOs) licensees and service providers.

“For POGOs that are domestic corporations, they are covered by Section 23 (E), Chapter II of the National Internal Revenue Code (NIRC) and their income shall be subjected to Philippine taxes regardless of whether the same was derived from a source outside of the Philippines,” Panelo said.

“As for those POGOs considered as foreign corporations, they too are taxable but only for income which they derived from sources within the country. This is pursuant to Section 23 (F), Chapter II of the NIRC,” he added.

Panelo said they expect the DOF, alongside the Bureau of Internal Revenue (BIR), to evaluate the charters and operations of these entities to subject them to Philippine taxes in accordance with the law.

“While the matter is being studied at length by the DOF, what is clear is that the State cannot be denied its right to collect on all applicable taxes on any entity or individual,” he said.

He maintained that the POGO workers’ compensation, salaries, or wages for services rendered here are “considered taxable income under Section 23 (A) & (D) of the NIRC.”

Solicitor General Jose Calida earlier argued that the POGOs cannot be taxed in the country based on the source of income of principle. Calida explained that even though POGOs are based in the country, the bets are taken outside the country.

Finance Secretary Carlos Dominguez, however, disputed Calida’s opinion, insisting that POGO earnings are taxable.

Panelo, in his statement Tuesday, clarified that the OSG’s opinion on the matter was subject to change.

“It is our understanding, however, that the opinion of the OSG was issued in response to, and was based on the representations of an official from the Philippine Amusement and Gaming Corporation (PAGCOR) and is thus subject to change, depending on the elaboration of factual circumstances,” he said.

Panelo recognized that the DOF has the primary mandate, based on the Administrative Code, to formulate, institutionalize, and administer fiscal policies in coordination with other concerned subdivisions, agencies, and instrumentalities of government.

“As such, the discretion of the DOF, alongside the Bureau of Internal Revenue (BIR), carries significant weight on matters of taxation,” he added.

Panelo also invoked a Supreme Court pronouncement that “taxes are the nation’s lifeblood through which government agencies continue to operate and with which the state discharges its functions for the welfare of its constituents.”

“In order to defray the expenses of the government, the state has, among its inherent powers, the authority to tax,” he noted.

“This administration will not be stymied nor be stopped by technicalities caused by the exploitation of developing technologies in collecting what is due the government,” he added.

A congressional panel recently approved a bill setting a 5 percent franchise tax on POGOs in the wake of government efforts to collect back taxes from these firms. The bill, proposed by Albay 2nd District Rep. Joel Salceda, is reportedly expected to raise P45 billion every year in government revenues.

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