Very recently, the Office of the Solicitor General (OSG) was reported to have given the Philippine Amusement and Gaming Corporation (Pagcor) an opinion that Philippine Offshore Gaming Operators, more popularly known as POGOS, are not subject to income tax in the Philippines.
The OSG’s opinion is apparently based on the “source of income” principle in taxation. In layman’s terms, this means that the activity that produces the income is taxable in the place where the activity is performed.
Of course, the matter is not as simple as it appears to be. The income-producing activity may be performed in several countries. This is especially true for online businesses which are accessible anywhere in the world. Online betting by foreign-based players is a good example.
The online bet is placed outside the Philippines but POGOs which are based in the Philippines render services (such as recording, live streaming,and IT support for the online games) that are part of the income-producing activity. Otherwise stated, the income-producing activity is performed in multiple jurisdictions. Even following the “source of income” principle in tax law, therefore, several countries may assert their power to tax the same activity.
In fairness to the OSG, the issue is a complex global issue. Its complexity is shown by the fact that no less than the Organization for Economic Cooperation and Development (OECD) has spent time and resources to study the issue and came up with a proposal on how governments can address it.
But rather than deal with this complex issue, my questions are basic.
Does the OSG have the power to give advisory opinions to other government agencies like Pagcor? Is its authority not limited to representing the government in litigation cases and investigations? Is the power to give advisory opinions not reserved to other government agencies such as the Office of the Government Corporate Counsel (in case of legal opinions needed by government corporations like Pagcor), the Department of Finance and Bureau of Internal Revenue (on the interpretation of tax laws), or the Secretary of Justice if there is a conflict of opinion between the BIR and Pagcor?
Furthermore, since the OSG is presently representing the BIR as its lawyer in several litigation cases pursuant to its mandate under the law, did the OSG or Solicitor General violate its fiduciary duty as a lawyer when it gave an opinion contrary to the interest of the BIR?
Or is there a dot I’m missing? – Rappler.com
The author, a senior partner of ACCRALAW, is the Vice President of the Management Association of the Philippines and a trustee of the Financial Executives Institute of the Philippines. The views in this column are exclusively his. He may be contacted at: firstname.lastname@example.org