|
By Malou Mangahas And Patricia M. De Leon, Philippine
Center For Investigative Journalism
Editor’s note: The first part detailed
how allies of the Arroyo government are linked to a company
investing in Pagcor’s multibillion-peso enterprise, “Tourism
City.”
Last of two parts
Mrs. Gloria Arroyo will go down in Philippine
history as the president who made gambling the third-biggest source
of government revenues, after taxes and customs duties.
Under her watch over the last seven years, the
Philippine Amusement and Gaming Corp. (Pagcor) has grown into a
humongous money—and power—machine. Until now the monopolistic
state gambling agency, Pagcor’s gross revenues of P13 billion in
2001 more than doubled to P26.83 billion in 2007, or an average
annual growth of 18 percent.
This falls behind only the tax collections of
P712.09 billion by the Bureau of Internal Revenue (BIR), and the
Bureau of Customs’ collections of P210.5 billion in 2007.
On parallel track, the President’s Social Fund
that serves as President Arroyo’s fat political purse has recorded
a steeper climb. Funded from Malacañang’s shares in Pagcor’s
revenues, the fund increased nearly 50 percent from P1.03 billion in
2006 to P1.42 billion in 2007.
That may increase some more should Pagcor’s
latest venture, the $20-billion Tourism City that will rise on
reclaimed land along Manila Bay, succeed. Pagcor’s “terms of
reference” for the project boasts that Tourism City “could
triple the annual income generation of Pagcor from $500 million to
$1.5 billion, thus dramatically increasing the income of the
National Government to whom all Pagcor revenues accrue.”
In a recent interview with the Philippine Center
for Investigative Journalism, Pagcor Senior Vice President Rene
Figueroa qualified that “the government will have more money, not
Pagcor,” on account of Tourism City.
Who spends and how?
But the Palace and Pagcor may have some serious
explaining to do regarding the latter’s ever-increasing billions.
The questions they need to answer include where Pagcor’s money
goes, who spends it and how, and why the Commission on Audit and the
BIR said Pagcor is not paying taxes correctly and fully.
Pagcor President Rafael “Butch” Francisco,
who also spoke with Philippine Center for Investigative Journalism
last week, did say that of the agency’s gross earnings, 65 percent
represents the government’s shares, franchise tax, and the
President’s Social Fund. This portion, he said, is automatically
deducted from what Pagcor earns.
The 35-percent balance of Pagcor’s gross
revenues goes to operating expenses, as well as into a so-called
community services fund and allocations for various “confidential,
intelligence, extraordinary and miscellaneous expenses,” and
“subsidies and donations,” he added.
If the President’s Social Fund runs dry, or a
calamity or disaster strikes, Francisco said, Pagcor draws
additional amounts from its “community service fund.”
But he admitted that for most of these funds,
liquidation reports are not submitted to explain how Malacañang and
the other agencies spend the amounts. Sometimes, he said, President
Arroyo makes requests for donations, even before Pagcor could raise
the money for these.
“Actually, minsan the Office of the President,
[says] pakidonate naman dito. Ibig sabihin, hindi pa kumpleto
‘yung ano [collections] namin, nakaearmark na [Actually, sometimes
the Office of the President says, please donate for this thing. That
means even though we haven’t completed our collection, the
money’s already earmarked],” Francisco said. “Kung minsan,
nakikita namin kung saan napupunta, ‘yung iba hindi na namin
nakikita na [Sometimes we see where it’s going, but the others we
don’t].”
Pagcor has 12,000 employees but in 2007, the
agency reported operating expenses of P11.03 billion, up from P10.73
billion in 2006. Month on month, Pagcor’s operations bill amounts
to P919 million on average, or about P30 million daily.
Unfortunately, the law is largely silent about
how Pagcor, Malacañang, and other state agencies must account for
how they spend Pagcor’s money. But laws do specify where
Pagcor’s billions should go: to the national government through
dividends and taxes, other state agencies, and yes, the
President’s Social Fund.
Half of Pagcor’s gross earnings, in fact, are
to go to the national government. It must also pay 5 percent of
gross earnings as franchise tax.
Other laws mandate Pagcor to set aside portions
of its net earnings to the Philippine Sports Commission, host
cities, and other government funds, including the Early Childhood
Care and Development Fund, Gasoline Station Training and Loan Fund,
Barangay Micro Business Enterprises, National Endowment Fund for
Children’s Television, and other “mandated contributions.”
Winnings vs. earnings
But the 2006 Commission on Audit report on
Pagcor reveals that Pagcor has not remitted to these smaller
government funds a cumulative total of P719.77 million.
Opposition Senator Francis Escudero has taken
Pagcor to task for computing its franchise tax against
“winnings” and not against gross earnings. Based on its
P22-billion “winnings” in 2007, Pagcor paid only P1.1 billion in
franchise tax.
Escudero said Pagcor should have paid P1.34
billion, or P243 million more, based on its gross earnings of P26.85
billion last year.
The BIR, for its part, has insisted that the
reformed Value-Added Tax law should apply, and Pagcor, a
corporation, must pay 35-percent corporate tax, in lieu of a
franchise tax. Pagcor has filed a suit with the Supreme Court to
contest the BIR’s position.
Then there is Pagcor’s refusal to pay
dividends to the national government, equivalent to half of its net
income after taxes. Pagcor has argued that it should be exempted
from paying dividends, on account of its franchise tax burden, and
that every month of its operations supposedly starts with zero net
earnings, and therefore it has nothing to remit.
Both arguments have been debunked by Commission
on Audit, citing a Department of Justice opinion that its payment of
franchise taxes does not exempt Pagcor from paying dividends.
The Commission on Audit has refuted Pagcor’s
claim of having nothing to remit as dividends. In 2005 and 2006, the
commission said, Pagcor earned a cumulative P1.87 billion, net of
corporate income tax. The agency has insisted that Pagcor must still
pay half of this amount, or about P933 million as dividends due the
national government for 2005 to 2006.
Pagcor has filed an appeal with the Justice
department to reverse its opinion on Pagcor’s dividends
obligation. Even more, Pagcor Chairman Efraim Genuino also sent a
letter to Malacañang, seeking guidance from the President, on the
issue of whether or not Pagcor must be covered by the law on the
dividends burden of government-owned and -controlled corporations.
The inquiry, Commission on Audit said, has been
referred to the Department of Finance for comment and advice.
Fast, vast expansion
By contrast, there is no question over how
Pagcor has been raking in more and more money under the Arroyo
administration.
In the last seven years, state-sponsored
gambling in the country has expanded at great speed across
geographical regions, games, and onsite and online platforms.
Pagcor today operates a virtual gaming kingdom:
13 casinos in major Philippine cities, eight VIP (very important
person) clubs, three slot-machine arcades, 180 bingo parlors, and a
lucrative Internet casino platform using prepaid cards.
Working with technology provider Philweb Corp.
(a subsidiary of the Philippine Long Distance & Telephone Co.),
Pagcor earned P138.5 million in 2005 just from its Basketball
Jackpot and e-Casino Filipino games online.
These days, Philweb is among the growing list of
corporations placing their bets on the success of Tourism City and
seeking Pagcor’s approval to participate in the project.
Another local group that has expressed interest
is Waterfront Philippines Inc., which is owned by the family of
William Gatchalian, a close friend and adviser on overseas
workers’ affairs of deposed President Joseph Estrada.
Pagcor insiders said there have also been
several queries from overseas regarding how to be part of Tourism
City, including those from a still-unidentified but big US gaming
concern, and even “offers from Russians.”
For sure, Pagcor’s track record as a
moneymaking machine has made its Tourism City venture look like a
safe bet. Indeed, Pagcor has had a winning streak in business
largely because it is a monopoly. From every peso of every bet made
by gamers and gamblers—rich or poor, Filipino or foreigner, Pagcor
takes a cut. That has not changed with its new charter, which has
only enhanced its earning power some more and made the likes of
Tourism City possible.
Three-pronged mandate
Pagcor was created in 1977 by then-President
Ferdinand Marcos, through Presidential Decree 1067-A, as a
100-percent government-owned and -controlled corporation. The agency
acquired a 25-year charter on July 11, 1983 under Presidential
Decree 1869, and was allowed continued existence by Marcos’
immediate successor, Corazon Aquino, as well as by subsequent
presidents.
The charter assigned Pagcor with a three-pronged
mandate: regulate all games of chance, particularly casino gaming in
the country; raise funds for the governments’ socio-civic and
national developmental efforts; and help boost the country’s
tourism industry.
Under that old charter, though, Pagcor and
Pagcor alone was allowed to run and operate legal gaming and
gambling, and typically, in what are called “special economic
zones.”
But since Pagcor was granted a new charter last
year, it can now set up, sub-franchise, and approve casino
operations anywhere in the Philippines.
The caveat is that under the new charter, as it
was in the old, Pagcor can do so only with the consent of local
government units.
Still, chances are not one of the 11 local
governments that have given their nod to Pagcor operations in their
area is regretting its decision.
An official report obtained by the Philippine
Center for Investigative Journalism showed that from 2004 to 2007,
the 11 cities hosting Pagcor gaming outlets have received a
four-fold average increase in their “share” from the agency’s
revenues.
Manila tops the list, with “actual
remittances” from Pagcor of P437 million from 2004 to August 2007;
Pasay City, P196 million; Angeles City in Pampanga province, P188
million; Cebu City, P187.5 million; Parañaque City, P172 million;
Tagaytay City, P92 million; Davao City, P86 million; Olongapo City
in Zambales, P78.5 million; Bacolod City, P74.5 million; Mactan in
Lapu-Lapu City, Cebu province, P64.5 million; and Laoag City in
Ilocos Norte, P25.5 million.
-- With Additional Reporting By Tita C. Valderama
|
