Challenges Currently Faced by PAGCOR and Its POGOs

When the Philippine government decided to embrace online gambling, the industry went on to become a major source of revenue that boosted the country’s economy. Currently, certain local developments and the COVID-19 outbreak presented challenges that is making it difficult for the Philippine Amusement and Gambling Corporation (PAGCOR) and its POGOs to duplicate, if not surpass, the economic feats achieved in the previous years.

BIR to POGOs : No Tax Payments, No Clearance

Since the main purpose of allowing offshore gambling operators to set up their base of operation in the Philippines is to generate revenues from tax collections, the Bureau of Internal Revenue (BIR) was mandated to make sure that such objective is achieved. It is the tax agency’s job to make certain that only those who pay accurate taxes in a timely manner will be allowed to operate as Philippine Offshore Online Gambling Operators (POGOs) under PAGCOR’s licensure and supervision.

According to a 2018 business report, PAGCOR’s POGOs remitted nearly Php 12 billion to the Philippines’ coffers since starting operations in 2017. Things took a different turn though, when the COVID-19 outbreak spread not only in Asia but globally.

As the economies of Asian countries took a hit, so did the revenues being generated by POGOs. During the lockdown periods, only 32 of the 60 POGOs that requested to operate in limited capacity were given tax clearance by the BIR as a condition to PAGCOR’s approval of such request.

Recently, of the POGOs looking to fully resume their offshore online gambling operation, only 111 of the 218 licensed remote gambling operators were given the go-signal by the BIR. Five operators were suspended, while five other licenses were cancelled and the remaining POGOs who did not receive a clearance are presumed to be remiss in the payment of the required taxes.

Lawmakers Passed Legislation to Increase Taxes on POGOs

Prior to the pandemic, online gambling, especially in Southeast Asian countries showed promising prospects of growing. The younger generation of Asian gamblers demonstrated increased participation in sports betting and online casino gaming by way of mobile applications. Global market reports came out with facts and figures showing the Asian online gambling market as on track to achieve as much as USD127.3 billion in revenues within a forecast period starting in 2020 up to 2027.

Apparently lawmakers were of the belief that the Philippine government was not getting enough, as the Php12 billion revenues earned in the past years were only a “drop-in-the-bucket” of the total USD revenues being earned by igaming business operators in the Asian market.

In line with a tax reform legislation passed by Congress, the 2% Franchise Tax imposed on POGOs has increased to 5%. The reform included calculating tax due based on the total bets received instead of the previous “net bets received after payment of winnings.” The BIR is expected to more than double its collection this year; the Php 8 billion tax revenues collected from POGOS in 2019 is estimated to bring as much Php17.5 billion in tax revenues for 2020.

However, this projection may not be realized, because as it is, POGOs are now considering exiting the Philippines’ gambling regulatory landscape. In fact, 42 POGOs have already requested cancellation of their accreditation. Owners of properties being rented by POGOs as offices and official residences of Chinese employees believe that more operators will be leaving the country soon. Apparently, others have already given notification that they will not be renewing their respective lease contracts next year.

POGO operators, specially those offering remote gambling in Indonesia, already face challenges in maintaining private network systems that will allow their customers to access their online gambling websites without fear of detection

If constrained to pay more in regulatory taxes then it follows that they will have to increase charges imposed on Indonesian customers. Yet there is a long Daftar Judi Online websites offering regulated online casinos and sports betting to Indonesian gamblers. Increasing the cost of gambling could drive away their regular Indonesian patrons to the sites of operators licensed by regulators other than PAGCOR.