Pagcor not income tax exempt - DOF

MANILA, Philippines - The Department of Finance (DOF) reiterated its previous position that the Philippine Amusement and Gaming Corp. (PAGCOR), the state-owned operator of casinos and other gaming activities, should not be exempt from paying income taxes.

During a recent hearing at the House of Representatives on the bill seeking to exempt PAGCOR from the payment of income taxes, the DOF said it is not inclined to support the pending legislation as it would deplete government revenues.

In its position paper submitted to the House, the department said that the Bureau of Internal Revenue (BIR) has a preliminary tax assessment on PAGCOR amounting to P6.8 billion for 2005 and 2006. The amount covers value added tax (VAT), income tax and fringe benefits.

PAGCOR refused to pay corporate income tax and VAT, saying that it is among the government-owned and controlled corporations (GOCCs) that are exempt from taxes, along with the Philippine Charity Sweepstakes Office (PCSO), Social Security System and the Government Service Insurance System.

However, the Finance department said that Republic Act 9337 or the Reformed Value Added Tax Law of 2005 deleted PAGCOR from the coverage of GOCCs that are exempt from income tax.

PAGCOR, however, said that if the government insists on taxing PAGCOR, the corporation would incur a net cash loss and would not be able to remit any cash contribution to the president’s social fund. According to PAGCOR, this would translate to a reduction of about P1.048 billion yearly.

The government also wants to impose VAT on PAGCOR, saying that VAT had already replaced the five percent franchise tax imposed on the corporation.

The BIR has brought the case to the Supreme Court but the court has yet to decide on the matter.

Pending the resolution of the case, government officials said the BIR is now assessing how much franchise taxes PAGCOR should be paying.

At present, PAGCOR has four licensed casinos—Fontana Casino in Pampanga, East Bay Casino in Rizal, Poro Point Casino in La Union and Fort Stotsenberg, also in Pampanga.

In 2006, PAGCOR’s total income amounted to more than P24 billion.