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PAGCOR lenient to offshore operators, but stringent in govt remittance

MANILA, Philippines – State auditors said the Philippine Amusement and Gaming Corporation's (PAGCOR) underremittances have reached P21 billion in 7 years for the national government, and P1.631 billion in 2017 alone for the Philippine Sports Commission (PSC).

PAGCOR law or Presidential Decree (P.D) 1869 says the national government is entitled to a 50% share in PAGCOR’s “aggregate gross earnings from its franchise.” Meanwhile, the PSC law states that the commission is entitled to 5% of PAGCOR’s earnings.

According to the Commission on Audit (COA), PAGCOR only remits shares based on income from gaming operations only, instead of its entire income.

Apart from gaming income, PAGCOR also earns from service income like processing fees, fines, and penalties, as well as business income like rentals and sales.

Because of PAGCOR’s limited interpretation of the income sharing clauses, COA said PAGCOR has come to owe the national government and PSC billions worth of remittances. 

Under P.D 1869, the national government’s income share from PAGCOR shall be used for infrastructure and other socio-civic projects like flood control, sewerage systems and other livelihood programs.

State auditors thus said PAGCOR must remit P21 billion to the Bureau of Treasury, and P1.631 billion to the PSC.

“If it is impractical due to huge amount involved as settlement would result to the abrupt depletion of PAGCOR earnings, we further recommended that Management request for the revision or repeal of the law through legislative process,” said COA.

For the PSC, auditors said PAGCOR can request a condonation of its liabilities if it could prove that the settlement would result to an abrupt depletion of its earnings.

Outstanding balance

Auditors, however, noted PAGCOR has been lenient with offshore gaming operators, such as to let an outstanding balance worth P481.928 million go unpaid for 10 months.

“Accounts receivable from Offshore Gaming Operators showed that out of its outstanding balance of P759.114 million as of December 31, 2017, the amount of P481.928 million or 63.48% remained uncollected/unremitted from one to 10 months but the licensees were permitted to operate, contrary to Section 28 of the Rules and Regulations for Philippine Offshore Gaming Operations (POGO),” COA said.

The audit report does not reveal the names of the operators involved.

POGO authorizes PAGCOR to suspend or cancel a license if the operator does not fulfill its financial commitments.

Auditors found that 21 out of the 52 licensees did not settle their dues for a period of 1-10 months.

In its response to COA, PAGCOR said that it had “filed the appropriate legal actions and demand letters have also been issued.”

A petition was filed in 2016 at the Supreme Court which seeks to declare offshore gaming as illegal.

In addition, auditors also found that 5 poker operators continue to operate despite not getting their licenses renewed.

PAGCOR said “it is highly counter-productive if operators were to cease business operation and incur losses pending their compliance with the renewal process when in fact, they are willing and able to operate and consequently generate income.”

COA maintained that the practice violates PAGCOR’s own Gaming Regulatory Manual.

The 2017 audit report of PAGCOR also reveals irregularities in P345 million worth of allowances and bonuses given to top officials, and other employees. –

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email or tweet @lianbuan.