Tax them

Obvious to anyone who hasn’t been living under a rock is the presence of Chinese nationals in our midst, as though borne on strong waves triggered by their government’s aggressive behavior in the West Philippine Sea. Occupying considerable office and residential space in Metro Manila and other urban areas, in the process generating upticks in rentals, retail, transportation, food, small businesses like laundry shops and such, even prostitution, they work in Philippine offshore gaming operations or Pogos that primarily cater to mainland Chinese gamblers.

Here are figures provided by the Bureau of Internal Revenue (BIR) early this month, citing data from the Philippine Amusement and Gaming Corp. (Pagcor): As many as 86,172 persons are employed by Pogo service providers. Of the total, 14,829 (or 17 percent) are Filipinos, and 71,343 (83 percent) are foreigners. Of the foreigners, 62,726 (88 percent) are Chinese.

Pogos are reported to be making more than P200 billion in income.

Per reports, nationwide there are at least 58 Pogos and more than 200 Pogo service providers accredited by Pagcor. Imagine the tax revenues that the Philippine government stands to gain from all that gambling (which, despite Deng Xiaoping’s affirmation that to get rich is glorious, the Chinese government actually frowns upon). With the tax money safeguarded from official plunder and allocated for judicious use, think of the sturdy schools and hospitals that can be built, the genuine inroads in agriculture for the farmers’ benefit, the long-overdue pay adjustments for teachers and nurses…

But inexplicably, Solicitor General Jose Calida issued an opinion early this week, supposedly to Pagcor and the BIR, that Pogos could not be taxed based on the “source of income” principle in the Philippine tax code. Per his reasoning, an offshore gaming operator, even if employing a service provider, earns “from bets placed by its registered foreign subscribers.” Thus, that offshore gaming operator cannot be taxed because its clients are outside the Philippines, he said.

The Solicitor General was promptly shouted down—correctly—by his fellow allies of the Duterte administration as well as Senate Minority Leader Franklin Drilon. On the same day that Calida issued his opinion, Finance Secretary Carlos Dominguez III told reporters that it was not the Office of the Solicitor General’s role to interpret tax laws because this was the BIR’s “primary jurisdiction,” and also that Pogos should pay corporate income taxes and their workers personal income taxes.

In the House of Representatives, “Let them go” was what Albay Rep. Joey Salceda said when asked if his proposed tax measure, House Bill No. 5267, would not push Pogos to decamp for less stringent shores. It’s a bogey that Pagcor trots out whenever the idea of taxing these highly profitable gambling enterprises arise, thus significantly adding to the mendicant image that this nation has acquired.

Salceda, who chairs the House committee on ways and means, did not beat around the bush: Pagcor should not issue permits to Pogos that do not pay tax. “No tax, no license. Let them go. Anyway, they are not paying taxes.”

Pagcor is reportedly expecting to earn P10 billion in license fees from Pogos in 2020.

Surely Calida has not forgotten that as early as 2017, the BIR issued Revenue Memorandum Circular (RMC) No. 102-2017 requiring Pogos authorized by Pagcor to pay 5-percent franchise tax on gaming income “in lieu” of other taxes, and that in 2018, it issued RMC 78-2018 laying out “special rules” on Pogo registration with the BIR for the renewal of Pagcor licenses.

Calida also seems to have overlooked the BIR’s padlocking in September of Great Empire Gaming and Amusement Corp. (Gegac), described as one of the biggest Pogo service providers in the country, for operating without enlisting with the BIR as a “VAT-registered taxpayer.” The shutdown of Gegac—with offices in Parañaque City and Subic Freeport, where it was registered—was in compliance with Dominguez’s order that tax-deficient Pogos and their service providers be shuttered. In the case of Gegac—which, when closed, was employing more than 8,000 workers, mostly Chinese—the BIR said “the closure will be lifted upon payment [of the unpaid tax].”

As this is being written, a report quotes the Solicitor General as expressing full support for the efforts of the BIR and the Department of Finance in taxing Pogos and their employees in the country, and pointing out that his opinion was in reference to “foreign-based Pogos.”

Oh. Or did it cross his mind that prostitution rings have cropped up in Metro Manila, as evidenced by the raids (three in less than a month) on the Skytop International Club in Makati City? It’s a grim reality brought by Pogos. Not that taxation will stamp out the evil.