Senate Minority Leader Franklin Drilon disputed the opinion rendered by the Office of the Solicitor General that the Philippine offshore gaming operators (POGOs) cannot be taxed, warning that such a “misplaced and misguided” opinion may “open a can of worms” in the country’s tax system.
“First, the OSG is in no business to interpret our tax laws. The interpretation of the country’s tax laws is lodged within the Bureau of Internal Revenue and the Department of Finance,” Drilon said.
“Pursuant to the National Internal Revenue Code, the power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance,” Drilon said.
The Department of Finance wants to generate more taxes from POGOs.
“Second, the government has the right to tax POGOs, consistent with the position of the economic managers. POGOs owe the government billions in unpaid taxes. The OSG should leave the matter to the BIR and DOF,” Drilon said.
“The opinion of the OSG is erroneous, misplaced and misguided. It does not serve the interest of the country. Who will benefit from it?” Drilon said.
“I do not think that we are prepared to face the consequences that may arise from such an erroneous opinion,” he stressed.
Under Section 42 of the National Revenue Code, Drilon said the government can derive income from compensation for labor or personal services performed in the Philippines.
“POGOs provide a service and the service is completed in the Philippines since all the betting occurs and is completed in the Philippines,” he explained.
Drilon explained, the person who offers the bet – the one who operates the gaming operation is in the Philippines, the one who accepts the bet is in the Philippines and the one who tells the better he wins or loses is in the Philippines.
The Philippine Gaming Corporation issues license to POGOs and POGOs cannot operate without a license precisely because they are subject to our laws.
“It is clear that the whole activity is conducted in the Philippines and, therefore, is subject to the jurisdiction of the Philippines,” Drilon said.
“Because if you say otherwise, then PAGCOR would have no authority over them,” he added.
If the opinion of the OSG is followed, thenthe companies in the Philippines who toll manufactured goods for foreign buyers or even the business processing outsourcing companies should also not be subject to tax.
Drilon added that if we are to follow the OSG, then professionals who provide foreign consultancy service do not have to pay taxes since the source of income is from overseas. (senate.gov.ph)