Revoking tax exemptions among gaming firms may hurt capital markets as well as hinder the company’s plan to establish an internationally known local gaming industry.
The Bureau of Internal Revenue (BIR) recently issued a memorandum that revoked the income-tax exemption of the Philippine Amusement and Gaming Corp. (Pagcor), removing Pagcor from the list of government-owned and -controlled companies that are tax-exempted. Pagcor licensees will then be subject to the 30-percent corporate income tax on its net taxable income instead of the 5-percent franchise tax on its gross gaming revenues.
In the Philippine Stock Exchange-Asiamoney forum on Philippine Leisure, Tourism, and Gaming held on Monday, some industry representatives said that changes in the gaming taxation may impede the country’s progress in becoming a popular center in the Asian gaming industry.
PSE President and Chief Executive Officer Hans Sicat indicated the amendments in the taxation rules on gaming will cause major consequences to the industry.
“When you change the goalpost in the middle, it will have an immediate impact on publicly listed companies,” Sicat said.
He even cited what happened in the mining industry when the government decided to amend some rules.
“About 24 months ago, a lot of the licenses for projects were not approved, because the government decided to change the taxation and royalty arrangements with the players.
The final decision has not been made in that sector and what has it resulted to? That particular sector was the only underperforming sector in the stock exchange,” Sicat said.
Ed Francisco, president at BDO Capital and Investment Corp., even specified that it is going to be unfair for equity investors to entertain changes in some rules, because they were expecting a certain margins and suddenly it becomes different because there will be new taxes.
“It will make investors rethink ‘why should I invest here? Should I take my money out or invest in other country?’” Francisco said.
Ciaran Carruthers, president and chief executive officer at Macau-based Asia Pacific Gaming Management and Consultancy, said that they are still not sure how the taxation changes will impact the gaming industry.
“You have to reduce potentially the size of your incentives to these high-value segments, and right now we are in very competitive position against Macau and Singapore, and other jurisdiction. And if we change our competitive position, it may have an impact, but right now it is still unclear on what is going to happen,” Carruthers said.
Madelaine B. Miraflor