Pagcor tax issue to be resolved soon – Razon

MANILA, Philippines – The issue between the Philippine Amusement and Gaming Corp (Pagcor) and the Bureau of Internal Revenue (BIR) on a rule requiring Pagcor and its licensees to pay corporate income tax is expected to be resolved soon, according to Bloomberry Resorts Corp chairman Enrique Razon.

Speaking at the company’s annual stockholders’ meeting on Monday, June 24, Razon said discussions are still ongoing but he is optimistic.

“Discussions are ongoing. We think we’re very much protected in the license agreement so we’re optimistic,” he said.

Pagcor has appealed to the BIR to reconsider its move to slap the state-owned gaming operator and its casino licensees with 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 an earlier statement.

The 4 gaming licensees of Pagcor’s upcoming Entertainment City — Bloomberry, Andrew Tan’s Alliance Global Group, Japanese tycoon Kazuo Okada, and Henry Sy’s Belle Corp — are all in discussions with Pagcor to find a way to resolve the BIR ruling, the effects of which would have a big impact on the growing gaming industry.

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

“Since the 5% franchise tax is embedded in the gaming fee that licensees pay to Pagcor and since Pagcor said it will not pass on any tax to the licensees, 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.

Solaire ramping up operations

Bloomberry opened its US$1.2 billion Solaire Manila Resort casino in March and generated P578.3 million in revenues in the first 15 days of operations.

“Everything is ramping up and I would say we’re positive in that sense,” said Razon.

According to him, the slot machine area is doing well. The restaurants are also popular. “We get a lot of people who come here just for the restaurants and are not players.”

Bloomberry will invest P20.5 billion in Phase 1-A, which will be completed by the third quarter of 2014.

The first phase of Solaire consists of 1,200 slot machines and 300 gaming tables, 7 international restaurants, and 500 hotel rooms. Phase 1-A will add 300 all-suite hotel rooms, as well as a shopping center with 30 to 40 high-end brand shops, a 1,800-seating entertainment theater, 3,000 parking spaces, a night club and more restaurants.

Bloomberry also budgeted $15 million for additional transportation equipment for hotel operations, security enhancements, additional slot machines and other cage and engineering modifications.

Razon said that there are no immediate plans for Phase 2.

“There is land for phase 2 but there are no plans. If the business goes much better than we think, we will be the first to start building phase 2,” he said.

Bloomberry’s first quarter earnings saw a net loss of P1.06 billion, 688.6% higher year-on-year, due to high pre-operating expenses as well as operating expenses and cost of sales during the first 15 days of operations.

Bloomberry said it is looking to raise fresh capital abroad through the issuance of bonds or notes. It stated that its board of directors approved the amendment in its articles of incorporation “to include in its primary purpose the power to guarantee the obligations of its subsidiaries or affiliates or any entity in which the corporation has lawful interest.”

“This amendment will allow Bloomberry to raise funds through issuance of bonds or notes by offshore financing vehicles that it will guarantee,” it added. – Rappler.com