MANILA, Philippines– A provision in the Bayanihan 2 law and several other revenue regulations imposing a 5% franchise tax on gross bets from Philippine Offshore Gaming Operators (POGOs) were deemed unconstitutional by the Supreme Court (SC).

In a 42-page ruling penned by Associate Justice Samuel Gaerlan issued on September 21, the SC en banc said that POGO tax provisions in the Bayanihan 2– or the Act Providing for COVID-19 response and recovery intervention and providing mechanism to accelerate the recovery and bolster the resiliency of the Philippine economy, providing funds therefore, and for other purposes– are considered as “riders.”

“Rider” provisions, or those that do not reflect the law’s title, are prohibited in the Constitution. This is to prevent lawmakers from creating “hodge-podge or log-rolling legislation.” 

15 POGOs filed a petition for prohibition before the SC, with the Bureau of Internal Revenue (BIR) and Department of Finance as respondents.

The SC pointed out that former Finance Secretary Carlos Dominguez III and BIR Commissioner Caesar Dulay admitted that Bayanihan 2 is not a tax measure.

“The imposition of new taxes, camouflaged as part of a long list of existing taxes, cannot be contemplated as an integral part of a temporary COVID-19 relief measure,” the SC said.

“The Bayanihan 2 Law merely realigns these already existing sources of funding and funnels it to be used for COVID-19 relief measures,” it added.

The High Court also said that three BIR regulations that impose franchise tax, income tax, and other taxes on POGOs during the pandemic are null and void.

At the height of the pandemic-induced recession, former president Rodrigo Duterte and lawmakers were scouring for cash.

The controversial POGOs, an industry plagued with tax evasion allegations, were deemed as a source for these funds.

But POGO petitioners said that Bayanihan 2 violated their right to  due process and equal protection of the law. 

The Bayanihan 2 law though already expired last year. –Rappler.com