The Philippine Gaming Tax Increases by 15%

According to the Philippines Bureau of International Revenue, the total tax collected from iGaming firms in 2020 was $149.3 million (PHP7.18 billion). Now that’s a whopping 11.7% increase from the previous year’s $133.7 million.

Well, that’s just about to go a notch higher after the Philippines authorities approved a 5% tax on offshore Philippine gaming companies on Monday, Feb 8, 2021. The POGOs (Philippine Offshore Gambling Operators) offer online gambling services to players in mainland China, where betting is illegal. It’s important to note that President Rodrigo rejected China’s request to ban these firms in 2019.

What’s in the new law?

The House Bill 5777 was embraced by 198 members of the House of Representatives, the Lower House. The only thing remaining is the approval of the 24-member Senate and the signature of President Rodrigo Duterte.

One of the bill’s sponsors, Joey Salceda, said that the law would generate $3,99 billion in taxes if passed. Under the law, POGOs would have to part with a 5% tax on their gross gaming receipts and other revenues.

In addition to that, the new rule would introduce a 25% withholding tax on foreign nationals employed by POGOs. However, the employee needs to earn over $12,491 (approximately PHP600,000) to pay the withholding tax.

Between 2016 to 2019, the Philippian gaming regulator managed to collect PHP19 billion from online gambling companies. But lawmakers argued that POGOs and other betting service providers didn’t pay at least $1.7 billion in taxes between 2018 to 2019. This led to a crackdown on these firms, stricter tax regulations, and a travel ban on mainland Chinese workers. As a result, most companies left the Philippine casino and betting industry last year.

Fewer online casino operators, more taxes

While the country has refused to shut down the POGO industry completely, the gaming regulator has minimized the overall number of licensed operators. In 2019, PAGCOR (Philippine Amusement and Gaming Corporation) stopped giving out gaming permits to new offshore companies after President Duterte’s directive.

As said before, most operators closed shop last year due to COVID-19 and mainland China’s citizens looking to work on POGO centers. Today, the number of licensed POGO providers in the Philippines is 51, down from the previous 130+.

Overall, the revenue gain in the troubled Philippian gaming industry results from more taxation by the government. But the iGaming operators that stayed put benefited immensely from the business travel and COVID-19 destabilizing the land-based casino industry. As a result, more casino players gambled online via a POGO.

Concerns over the new law

As expected in any democratic space, House Bill 5777 received its fair share of bashing from critics. According to Carlos Zarate, the Deputy Minority Leader in the Lower House, this bill would further legitimize online gambling in the country.

In a statement, he said: “There are security concerns raised against POGOs that are still very much valid because these hubs can be used for expansionist military and political purposes of a foreign country, like China.”

Remember that PAGCOR (Philippian Amusement and Gaming Corporation) had previously announced that POGOs would operate partially, with only 30% of its human resources reporting to work.

What the future holds

The new tax demands will undoubtedly cause many other iGaming service providers to reconsider their presence in the Philippian market. Failure to comply with these hard-hitting rules will lead to issuing of “closure orders” by the BIR (Bureau of Internal Revenue), and the respective companies will cease to operate. But all in all, most reputable online casinos are pretty much available in this strictly regulated market.