SPECIAL REPORT

House bill seeks to split Pagcor’s functions

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Last of two parts
The explanatory note of HB 2265 states that the proposed Philippine Amusement and Gaming Commission (Pagcom) “would be burdened with the sole responsibility of regulation of gaming activities, including licensing and enforcement, without the power to engage in gaming operations. In short, the new Pagcom, designed to be purely regulatory, cannot do gaming business.”

Rep. BernadetteHerrera-Dy noted that while millions in revenues of the Philippine Amusement and Gaming Corp. (Pagcor) “generated from legal gaming activities have been channeled to development and social infrastructure projects … much remains to be desired in financial accountability.”

Under-remittance
In July, state auditors found that the gaming corporation owed the government a total of P15.4 billion in dividend remittances for the years 2011 to 2015.

By law, state corporations must remit half of their earnings to the Bureau of the Treasury.


According to the Commission on Audit, Pagcor should have remitted to the Treasury a total of P98.521 billion, representing the government’s 50 percent share from its total earnings.

However, Pagcor only remitted P72.6 billion, short of nearly P26 billion.

State auditors however recomputed Pagcor’s dividends and found an over-remittance during the same period, amounting to P10.561 billion.

“Re-computation, however, disclosed an over-remittance of the 50-percent cash dividend remitted by PAGCOR to the [Treasury] during the same years … in the total amount of P10.561 billion, bringing the net under-remittance to P15.401 billion,” Pagcor’s annual audit report stated.

The disparity stems from the way Pagcor computes its dividend remittances. Auditors found that Pagcor only took into account gaming earnings, not earnings from other activities.

State auditors pointed out that based on RA 7656 or the law requiring government corporations to remit dividends, the “computation of the 50 percent government share should be based on the entire income of Pagcor, not only income from gaming revenue.”

Privatization
Herrera-Dy said her bill “aims to address the major concerns such as the lack of focus on proper regulation, avoiding conflicts of interests and moral hazards, increasing vulnerability of regulators to issues with prospective investors/capitalists, [and]limiting government funding risk exposure in investments among others.”

“By clearly delineating, severing or divorcing in no uncertain terms the operation of gaming activities, on one hand, and regulation on the other, this bill hopes to create distance between those in charge of regulating gambling and those who stand to benefit from the revenue generated,” the text of the bill stated.

“As a result, it is believed that through adequately delineating the authorities in operation and regulation, gambling activities under the authority and control of present-day Pagcor will be better subjected to audit, economic and regulatory efficiency, neutral governance free from potential conflict of interest, institutional efficiency, and transparency.”

Herrera-Dy cited best practices in the US states of Washington, Nevada and New Jersey, which she said were reputed to hold “tighter, if not more effective regulatory frameworks where government and the private sector are made to interact in a sustainable manner and under a clearly defined gaming regime.”

The same was true for Singapore, Macau and some European countries, she said.

The lawmaker proposed a transitory privatization scheme of the Pagcor casinos under the Privatization Management Office of the Department of Finance.

HB 2265 also proposes to require Pagcom auditing and finances to pass through the National Treasury.

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