SC upholds Pagcor tax exemption

MANILA, Philippines - The Supreme Court (SC) has ordered the Bureau of Internal Revenue (BIR) to stop implementing its policy subjecting income of the Philippine Amusement and Gaming Corp. (Pagcor) to corporate tax.

In a 14-page ruling, the high court voided BIR’s Revenue Memorandum Circular (RMC) 33-2013 subjecting Pagcor’s income from its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools and other related operations to corporate tax.

The SC made the ruling as it clarified its 2011 decision that upheld the constitutionality of Republic Act 9337, which amended Section 27(c) of the National Internal Revenue Code and excluded Pagcor from entities exempted from paying corporate income tax.

It stressed that RA 9337 did not amend the Pagcor charter, which subjects only its income from gaming operations to the five-percent franchise tax while its income from operation of other related services to income tax only.

“It would be the height of injustice to impose franchise tax upon petitioner Pagcor for its income from other related services without basis,” the high court said.

The high court stressed that Congress would have stated verbatimly if it really intended to remove PAGCOR’s tax benefits under its charter.

“If no provision or amendment is stated in the franchise to effect the provisions of the general law (in this case RA 9337), it cannot be said that the same is the intent of the lawmakers, for repeal of laws by implication is not favored,” it said.

“In this regard, we agree with petitioner that if the lawmakers had intended to withdraw petitioner’s (Pagcor) tax exemption of its gaming income, then [its charter] should have been amended expressly,” the high court said..

The high court said the BIR committed grave abuse of discretion when it issued RMC 33-2013 subjecting Pagcor’s income from gaming operations and other related services to corporate income tax and five- percent franchise tax.

“Such act constitutes an overreach on the part of the respondent (BIR) which should be immediately struck down, lest grave injustice results,” the high court said.