Pagcor appeals BIR memo on income tax

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Pagcor is asking the tax bureau of reconsider its recent memo imposing corporate income tax on the gaming regulator and its licensees

INCOME TAX DAMPENS GAMING INDUSTRY. Pagcor to appeal BIR's decision to impose income tax. Photo by Aya Lowe/Rappler

MANILA, Philippines – The Philippine Amusement and Gaming Corp. (Pagcor) is appealing to the Bureau of Internal Revenue (BIR) to soften its stance on taxes slapped on Pagcor and its casino licensees.

On May 2, the BIR issued Memorandum Circular 33-2013, which states that all earnings of Pagcor from its operations are subject to corporate income tax.

“Pagcor is no longer exempt from corporate income tax as it has been effectively omitted from the list of government-owned or controlled corporations that are exempt from the payment of the income tax,” the
BIR said in a statement.

The circular stated that contractors and licensees of Pagcor, including the upcoming casinos in Entertainment City, are subject to the tax as well.

In a telephone interview, Pagcor chairman Cristino Naguiat said he met with BIR Commissioner Kim Henares on Friday to clarify the issue. “We will appeal the circular,” Naguiat said.

In a separate interview, Henares said the BIR has not received any formal appeal yet but said that the tax bureau would study Pagcor’s position.

“We have not received any position paper yet so there is nothing to study,” she said.

The 4 gaming licensees of Pagcor’s much-touted Entertainment City — Enrique Razon’s Bloomberry Resorts, Andrew Tan’s Alliance Global, Japanese tycoon Kazuo Okada and Henry Sy’s Belle Corp. — have questioned Pagcor regarding the BIR ruling.

A circular released by Bloomberry on April 30 said the new BIR rule would affect the entire gaming industry.

“This is an industry issue and the licensees of Pagcor are meeting to discuss and prepare a collective response to this matter,” it stated.

“Since the 5% franchise tax is imbedded in the gaming fee that licensees pay to Pagcor and since Pagcor said it will not pass on any tax to the licensee we expect the gaming fees will be reduced to remove the 5% franchise tax component. Bloomberry is still determining how the change from 5% franchise tax on gross gaming revenue to 30% corporate income tax on taxable income will affect its operations,” it added.

In a statement released to the Philippine Stock Exchange, Belle, which is due to open a casino in Entertainment City in 2014, said: “Pagcor for its part said the tax treatment on privately owned gaming operators would indeed change but assured that no Pagcor tax would be passed on to its licensees.”

Pagcor earlier settled unpaid back taxes amounting to almost P857 million incurred from 2004 to 2010. – Rappler.com

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