Pagcor statement on issues raised by Party-list Rep. Neri Colmenares

The Philippine Amusement and Gaming Corp. (Pagcor) has been a responsible corporate citizen under its incumbent management.

It is only under the state-owned gaming firm’s present administration that Pagcor has actually started remitting cash dividends to the National Treasury and began paying Corporate Income Tax and Fringe Benefits Tax to the Bureau of Internal Revenue (BIR).

On the payment of cash dividends

It was only last Feb. 17, 2014 when the Department of Finance (DOF) informed Pagcor that it has to remit P5.88 billion in unpaid cash dividends since 2005. We immediately reconciled the figures and informed DOF that based on our own computation, Pagcor only owes the National Treasury P5.14 billion and this amount pertains to the unremitted cash dividends of the previous Pagcor administration. To date, we have already paid P2.44 billion or almost half of these arrears. We already informed the DOF that Pagcor will settle the remaining arrears amounting to P2.71 billion by next year.

Apart from the cash dividends which this administration started paying beginning 2011, we have also settled P856.98 million in back taxes (P657.18 million in Corporate Income Tax and P199.80 million in Fringe Benefits Taxes) incurred by the previous Pagcor administration from 2004 to June 2010.

It should also be noted that our administration accelerated the payment for loans made by the past Pagcor management for the acquisition of various properties. These loans amounted to P1.65 billion as of June 30, 2010. We were able to settle this amount in less than a year after our new management assumed leadership of Pagcor.

It is also worth noting that due to the judicious management of funds of the incumbent Pagcor administration, the state-owned gaming firm was able to give P5 billion funding to the Department of Education (DepEd) for the construction of thousands of classrooms in public schools nationwide.

Reduction in license fees

In 2008 and 2009, the previous Pagcor Board issued provisional gaming licenses to four proponents of Entertainment City. The licenses require the proponents to pay to Pagcor license fees of 15 percent to 25 percent of gross gaming revenues. These license fees include five percent franchise tax payable to BIR. The licenses state that these license fees are in lieu of all taxes.

On April 17, 2013, the BIR issued Revenue Memorandum Circular No. 33-2013 clarifying that the proponents do not need to pay five percent franchise tax but are liable for income tax.

Following the contracts entered into by the previous Pagcor Board for the license fees to be in lieu of all taxes, the license fees were adjusted by 10 percent to range from five percent to 15 percent instead of the original range of 15 percent to 25 percent so that the proponents can give the 10 percent adjustment directly to the BIR as income tax. The proponents will still pay a total of 15 percent to 25 percent of their gaming revenues to the government except that the 10 percent will be directly remitted to the BIR instead of passing through Pagcor.

If the proponents pay income taxes greater than 10 percent of gaming revenues, then the proponents will end up paying more than 15 percent to 25 percent of gross gaming revenues to the government. If the proponents pay income taxes lower than 10 percent of gaming revenues, they must still pay 15 percent to 25 percent gross gaming revenues to the government. Thus, at the very least, this formula preserves the government’s financial benefits.

Regarding intelligence funds

Pagcor’s intelligence operations had been in place since 1993 and had always had presidential approval. The liquidation of cash advances being made for intelligence operations have always been done by the special disbursing officers in accordance with COA Circular 2003-002 which only required the submission of certifications of fund utilization.

Recently, however, the COA has requested the submission of additional documentary requirements beyond those required by COA Circular 2003-002. Pagcor has already complied with these requirements. We are also awaiting the guidelines being prepared jointly by GCG, DBM and the COA to cover intelligence and confidential funds of government entities. The issuance of these guidelines will further ensure judicious use of government funds.

Pagcor’s intelligence activities form an integral part of its gaming operations and give assurance to its gaming clientele that the integrity of its gaming activities is maintained and protected. The fact that Pagcor’s operations have grown in complexity and size over the years cannot be overemphasized, the results of which are being enjoyed by the government and various sectors of society.

We also wish to point out that for 2014, the projected disbursement for intelligence operations would actually fall below the 1999 levels in absolute amounts and much lower by 46 percent compared to the highest annual intelligence expense incurred by the previous Pagcor administration. Also, we are still looking for ways on how to reduce Pagcor’s intelligence expenses.