BIR: Legal issues holding back collection of franchise taxes from POGOs

The Bureau of Internal Revenue (BIR) on Wednesday said "legal issues" are hampering the collection of franchise taxes from Philippine Offshore Gaming Operators (POGOs).

According to BIR Deputy Commissioner Arnel Guballa, POGOs are claiming that they should not be subjected to franchise taxes as they are non-resident corporations.

"Ang nagiging issue kasi diyan sa POGO, is kasi ito ay offshore, tungkol doon sa franchise tax nila," he said during the day's Laging Handa virtual briefing.

"Ang BIR po, sinisingil natin sila doon sa franchise tax. Ngayon, ito pong mga abogado ng mga POGO, sinasabi nila na 'Hindi kami taxable kasi ang POGO ay offshore, ito ay nasa ibang bansa,' doon po -- offshore, this is a non-resident corporation, ibig sabihin foreign, so nandoon po 'yung legal issue," he elaborated.

The Philippine Amusement and Gaming Corp. (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)."

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.

Malacañang itself earlier claimed that POGOs are classified as BPOs, but such classification was rejected by the IT and Business Process Association of the Philippines (IBPAP).

"Ngayon, ang BIR naman po, patuloy na talagang pinu-push namin na sabi namin, since you are doing business here in the Philippines, you should pay the franchise tax," said Guballa.

"Although 'pag binasa natin 'yung batas, hindi po siya ganon kaliwanag whether or not itong offshore companies na ito ay liable sa franchise tax, kaya medyo doon po tayo nagkakaroon ng legal issue 'pag dating po dito sa mga POGOs," he added.

Guballa noted, however, that the BIR collects other forms of taxes from POGOs such as value-added tax and withholding tax.

"Doon lang po sa issue ng franchise tax 'yun, pero 'pag datin sa ibang taxes, sa VAT, 'yung witholding tax, nakokolekta na natin kasi kung maalala niyo since last year, ilan na po 'yung mga napasara naming POGO sa hindi pagbayad ng tax," he said.

The Department of Finance (DOF) in September 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.

Fot its part, 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. --KBK, GMA News