Controversy in the Philippines over PAGCOR’s formula for offsetting the tax liability of Entertainment City’s four new casino licensees has prompted a senator to call for an investigation into the deal.
Last year, the Philippine Amusement and Gaming Corporation, the government operator/regulator, negotiated a 10 percentage point reduction in fees the licensees will pay to the agency. The deal was concluded in response to a Supreme Court ruling upholding a decision by the Bureau of Internal Revenue to impose the country’s 30 percent corporate income tax on all gaming licensees, including PAGCOR. Previously, the industry was considered exempt from corporate tax.
But Senator Joseph Victor Ejercito has introduced a resolution authorizing the appropriate Senate committee to conduct an inquiry into the deal. He is concerned about the impact the fee reduction will have on PAGCOR’s normal payments to the government and wants to know if there was collusion between PAGCOR and its licensees to prevent the collection of appropriate taxes, which has been insinuated by BIR Commissioner Kim Santos-Henares. Ejercito noted that the agreement has already resulted in approximately PHP300 million (US$10 million) in monthly losses for the government since it was reached last April.
Normally, private casinos are supposed to pay PAGCOR license fees, effectively the country’s gaming tax, equivalent to 25 percent of gross revenues from main-floor table games and machine games and 15 percent from VIP tables. So the agreement in effect has reduced the gaming tax to 15 percent for mass tables and slots and 5 percent for high-roller and junket operations.
PAGCOR says the reduction is legal and in line with the terms of the licenses awarded the Entertainment City operators, which provide that their license fees are “in lieu of all taxes.”
