MANILA, Philippines –  Malacañang said on Tuesday, November 19, that the government can collect taxes from Philippine offshore gaming operations (POGOs), contrary to the position taken by the Office of the Solicitor General (OSG).

Presidential Spokesperson Salvador Panelo issued the statement in response to the OSG opinion that POGOs cannot be taxed in the country.

While Malacañang gave assurances that the Department of Finance (DOF) was studying the matter, Panelo said it was clear that “the State cannot be denied its right to collect on all applicable taxes on any entity or individual.”

“This Administration will not be stymied nor estopped by technicalities caused by the exploitation of developing technologies in collecting what is due the government,” he said.

What did the OSG say? The Philippine Star earlier reported that Solicitor General Jose Calida, in an opinion submitted to the Philippine Amusement and Gaming Corporation (Pagcor) and the Bureau of Internal Revenue (BIR), said that POGOs cannot be taxed based on the principle of “source of income” under the country’s tax code.

Calida said POGOs earn from bets placed by registered foreign subscribers. “Ultimately, an offshore-based operator’s income is the placement of bets on its online betting facility – which are derived from sources without (outside) the Philippines,” he said in his opinion.

What is Malacañang position? Malacañang said that POGOs, whether domestic  or foreign corporations, could be taxed.

Panelo said POGOs that are domesticcorporations are covered by Section 23 (E), Chapter II of the National Internal Revenue Code (NIRC), which meant their income are subject to Philippine taxes, regardless of whether derived from sources outside the Philippines.

“As for those POGOs considered as foreign corporations, they too are taxable but only for income which they derived from sources within the country. This is pursuant to Section 23 (F), Chapter II of the NIRC,” he said.

Panelo added: “With this, we trust that the DOF, together with the BIR, has the competence to evaluate the respective charters and operations of these entities in order to subject them to Philippine taxes in accordance with the law.”

Lawmakers challenge Calida: Lawmakers had earlier refuted Calida’s “misguided” opinion that POGOs could not be taxed by the government. (READ: China wants Philippines to ban online gambling)

The POGO industry is a substantial source of revenue for the Philippines with firms being subject to tax long before Calida’s latest opinion. POGOs paid P579 million in taxes in 2018, voluntarily paid P789 million in the 1st half of 2019, and owe the government over P4 billion in unpaid taxes. – Rappler.com