Pagcor pact with casinos sparks Senate probe

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WHILE the Bureau of Internal Revenue looks for ways on how to increase revenue collection in order to provide more money for the government, the Philippine Amusement and Gaming Corp. (Pagcor)–which is supposed to help the BIR accomplish the job–instead introduced a measure that apparently spares big casino operators from tax liabilities.

The move is part of an agreement between Pagcor and four casino operators in Entertainment City in Manila that lowered by 10 percentage points of licensee fees to be paid by the operators to Pagcor, the government’s gambling regulator and operator.

Because of possible impact of the agreement on Pagcor’s income that could significantly reduce the mandated remittance of the corporation to the government, Sen. Joseph Victor “JV” Ejercito has proposed that the appropriate Senate committee conduct an inquiry into the matter.

Ejercito, in filing Senate Resolution 860, also wants to know if there is collusion between Pagcor and its licensees to prevent the collection of correct taxes from Pagcor and its licensees as insinuated earlier by BIR Commissioner Kim Santos-Henares.


According to the senator, the agreement between Pagcor and the casino operators is their response to a BIR memorandum circular clarifying that Pagcor’s licensees are liable for corporate income tax under the National Internal Revenue Code.

Under the memorandum circular, the government corporation’s licensees are subjected to the 30 percent corporate income tax on their net taxable income instead of the five percent franchise tax on their gross gaming revenue as provided in their respective Provisional Licenses to operate casinos.

Pagcor has claimed that the basis for the reduction of the license fees is in line with Article IV, Section 20, of the licensees’ respective Provisional Licenses, which provide that the license fees that are paid to Pagcor are “in lieu of all taxes” notwithstanding the fact that under the Provisional Licenses, Pagcor is only required to indemnify its licensees with respect to any increase in “franchise” tax, not on “income” taxe, that the BIR is imposing.

Ejercito noted that the agreement has already resulted in approximately P300 million in monthly losses for the government since it was carried out last April.

“Taxes are the lifeblood of the government and their prompt and certain availability [is]an imperious need,” the senator said.

The BIR has been getting five percent from Pagcor’s earning as franchise tax, while 50 percent of the remaining 95 percent earnings of the government regulator to the national treasury.

Also, a portion of Pagcom’s income is remitted to the Social Fund to sustain priority projects of the Office of the President.

The Senate committees on government corporations and public enterprises and on ways and means headed by Senators Cynthia Villar and Juan Edgardo Angara respectively will be handling the inquiry.

Originally, the private casinos are supposed to pay Pagcor license fees equivalent to 25 percent of gross gaming revenues from regular tables, slot machines and other gaming machines and 15 percent from high-roller tables and junket operations.

But because of the agreement, the license fees were reduced to 15 percent for regular tables, slot machines and other gaming machines and to five percent for high-roller and junket operations.

Among those who supposedly benefitted from the agreement were Andrew Tan-led Travellers International Hotel Group Inc., Enrique Razon’s Bloomberry Resorts and Hotels Inc., SM and Melco Crown-led MCE Leisure (Philippines) Corp. and Kazuo Okada’s Tiger Resorts Leisure and Entertainment Inc.

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