BIR wants POGOs, other businesses suspended over failure to file tax returns

The Bureau of Internal Revenue (BIR) has proposed the suspension or temporary closure of Philippine Offshore Gaming Operators (POGOs) and business establishments that will not file their income tax return or underdeclare their sales or revenues.

BIR Deputy Commissioner Arnel Guballa made the suggestion on Thursday as the Senate ways and means panel tackled proposals to impose taxes on POGOs.

In his presentation, Guballa said the BIR endorses the passage of a measure taxing POGO licensees or operators and foreign nationals employed by POGO entities, amending Sections 22, 25, and 119 of the National Internal Revenue Code (NIRC).

The House of Representatives earlier approved on third and final reading the measure imposing a 25% income tax to alien individuals who are employed by offshore gaming licensees, and 5% excise tax on the gross revenue or receipts of POGOs.

Guballa suggested, however, that Section 115 of the NIRC be amended as well to include the failure to file any income tax return and substantial underdeclaration of sales or revenues as "additional grounds to suspend and temporarily close the business establishment of any person or taxpayer, not just a VAT-registered person or taxpayer."

At least two Senate bills, authored by Senators Imee Marcos and Ralph Recto, have been filed to impose taxes on POGOs.

The measures are being proposed essentially to clear any confusion as to whether POGOs are taxable under Philippine jurisdiction.

Marcos' bill is similar to the tax regime being proposed in the House-approved measure, while Recto's proposal is to subject POGOs, local gaming agents, and service providers to 30% income tax.

The PAGCOR Charter mandates a 5% franchise tax on gaming operations in lieu of other taxes, while the NIRC provides that non-resident aliens not engaged in trade or business within the Philippines are subject to a final withholding tax of 25% of their gross income.

Guballa said foreign nationals employed by POGOs should be considered non-resident aliens, but POGO entities argue that once their foreign employees acquire their working visas, they should be taxed like ordinary Filipino citizens or resident alien employees.

Meanwhile, POGO offshore-based licensees claim that they are not required to register and pay taxes as they are foreign-registered entities that do not derive income from the Philippines, he added.

Guballa noted that tax collections from POGOs in January 2021 have significantly gone down as compared to the same period last year.

"As of January 2021, the collection is barely P227.2 million compared to the same period last year wherein the collection is already P1.43 billion. There was a decrease of P715 million or 68.63%," he said.

For 2021, Guballa said the BIR is projecting POGO revenues at P3.92 billion.

The Golden Dragon Empire Ltd., one of the POGO entities in the country, expressed no objection to the taxes being proposed on POGOs.

"We don't object to the proposed measure now and we would like to clarify that my client [has] been paying the 5% franchise tax on gross gaming revenue," said Atty. Katrina Nepomuceno, the legal advisor of Golden Dragon Empire Ltd. —LDF, GMA News