The Philippine Amusement and Gaming Corporation (PAGCOR) as per law has to pay only 5% franchise tax from its gaming operations and normal income tax on the operations generated from regular services. The Bureau of Internal Revenue (BIR) was pushing for the 5% franchise tax to also be imposed on all the other services of Pagcor based on its Revenue Memorandum Circular (RMC) 33-2013.
Pagcor took the issue to court and after review the Supreme Court in the Philippines rejected BIR’s stance and stated that Pagcor will not have to pay the 5% franchise tax on regular services. The news was welcomed by the gambling industry in the Philippines as gambling companies will not have to part with a significant percentage of their profits but instead be able to invest it back into the business and use it for expansion purposes.
The court issued a statement through Associate Justice Diosdado Peralta saying “In this regard, we agree with petitioner that if the lawmakers had intended to withdraw petitioner’s (Pagcor) tax exemption of its gaming income, then [its charter] should have been amended expressly. Such act constitutes an overreach on the part of the respondent [BIR] which should be immediately struck down, lest grave injustice results”.
The gambling industry in the Philippines is growing at a rapid pace as gambling companies want to capitalize from Macau’s declining gambling industry. The Philippines has very relaxed gambling laws and casinos in the Philippines are now aggressively promoting and targeting VIP and high value gamblers from Macau. The ruling by the Supreme court will further encourage gambling establishments to invest in the Philippines for the long term.