Philippines to crack down on tax-dodging POGOs

16 September 2019

Philippine Finance Secretary Carlos Dominguez III has ordered the country’s Bureau of Internal Revenue (BIR) to shut down the operations of Philippines Offshore Gaming Operators (POGOs) that fail or refuse to pay income tax.

Dominguez issued the order after discovering that POGOs had largely failed to pay workers’ income taxes, despite repeated warnings from the government.

The sector’s total tax liability is estimated to be ₱21.62bn (£332.7m/€374.1m/$413.8m), though the licensed igaming operators have been slow to respond to tax demands.

To force them to pay the income tax owed, Dominguez said the authorities should shut down the businesses of those that fail to respond to tax assessments or refuse to pay.

Furthermore, he added, any offer to pay a lump sum to settle the matter, rather than the exact amount owed for each worker, must be rejected.

BIR deputy commissioner Arnel Guballa has asked for assistance from the Department of Labour and Employment (DOLE), the Bureau of Immigration and the country’s gambling regulator, the Philippine Amusement and Gaming Corporation. (PAGCOR) in closing down non-compliant POGOs.

Despite many POGOs failing to pay withholding taxes (such as income tax), Guballa noted that their contribution had risen in recent years. POGOs paid ₱175m in withholding taxes in 2017, which rose to ₱579m in 2018.

In 2019, between January and August, the BIR then collected ₱1.4bn from POGOs.

In related news, the Philippines Trade Union Congress has suggested establishing a new regulatory body to oversee the country’s online gaming industry. This follows local media reports that the Philippines is likely to see an influx of new foreign workers - mainly Chinese nationals - from Cambodia, after it announced plans to shut down its igaming industry by the end of 2019.

The Cambodian shutdown came amid pressure from China, which is urging its neighbours to ban online gambling. Despite allegations that POGOs are mistreating Chinese employees, and the Philippine government announcing a temporary halt to the issuing of new igaming licences, President Rodrigo Duterte has refused to implement a total ban.

Duterte said shutting down the sector would lead to widespread job losses, but also warned licensees to pay taxes or face regulatory action.