The government was able to collect a total of P6.42 billion in taxes from Philippine offshore gaming operators (POGOs) and their service providers in 2019, which was P4.04 billion or 169 percent more than the collection of P2.38 billion from these businesses in the previous year.
This increased tax take was the result of a sustained campaign spearheaded by Finance Secretary Carlos Dominguez III to crack down on errant POGOs and their service providers that have eschewed tax payments, including the income taxes that the government should be collecting from foreign nationals working for these firms.
Starting in March 2019, Dominguez called for a series of meetings with officials of various government agencies responsible for collating data on foreign nationals working here to firm up a plan on how the government can effectively collect an estimated P22 billion in taxes from these workers employed in POGOs and other related industries based in the country.
The meetings included members of an interagency task force led by the Department of Labor and Employment (DOLE) that monitors the entry of foreign workers here, along with officials from the Bureaus of Internal Revenue (BIR) and of Immigration (BI), Philippine Amusement and Gaming Corp. (Pagcor), Securities and Exchange Commission (SEC) and the special economic zones (SEZs) that host these online gaming corporations.
During the interagency meetings held at least twice a month, Dominguez spurred members of this group to collate a database of foreign workers primarily employed in POGOs, to, as he repeatedly told them, “enable the BIR to do its job of collecting taxes.”
The Finance secretary also pointed out in those meetings that it was grossly unfair to Filipino taxpayers dutifully paying their taxes for these POGO employees to continue avoiding paying their taxes.
Dominguez continued to preside over the regular meetings of the group until the BIR started to actually collect taxes from errant POGO service providers and shut down the operations of delinquent ones.
On the secretary's initiative, a joint memorandum circular (JMC) was also issued mobilizing various government agencies to run after tax-evading foreign workers.
The JMC consolidated the rules governing foreign workers intending to work in the Philippines and requires aliens to secure a Taxpayer Identification Numbers (TINs) before they are given work permits.
JMC Circular 001, series of 2019, was signed in July by Dominguez, Labor Secretary Silvestre Bello III, Justice Secretary Menardo Guevarra, BIR Commissioner Cesar Dulay, Professional Regulation Commission (PRC) chairman Teofilo Pilando, National Intelligence and Coordinating Agency (NICA) Director-General Alex Paul Monteagudo, Pagcor chairperson Andrea Domingo and representatives from the Department of Foreign Affairs (DFA), BI and Department of Environment and Natural Resources (DENR).
BIR Deputy Commissioner Arnel Guballa had initially estimated around 103,000 foreign workers in the POGO industry, and finally came up with a list of about 108,914 employed by 218 POGO service providers after cleaning up data provided by Pagcor, DOLE, BI and the ecozones.
The bureau reported to Dominguez that for 2019, it issued 170 notices to collect P27.35 billion in tax liabilities from errant POGOs. The BIR’s target was to collect at least P2 billion a month from POGOs, Guballa said.
In 2019, the BIR collected P5.13 billion in withholding taxes, P644.07 million in income taxes, P91.13 million in value-added taxes (VAT) and percentage taxes, P81.11 million in documentary stamp taxes and P469.13 million in other taxes from POGOs.
Since the start of the Dominguez-led interagency meetings, the BIR has shuttered the operations of at least four companies operating as POGO service providers, but have either failed to register their operations as such, allowing them to evade paying the correct taxes to the government, or are registered but not paying the correct amount of taxes.
Dominguez said there will be no letup in this ongoing crackdown as the BIR further steps up its campaign against errant POGOs in 2020.
"Basically we’re going hard against people who are evading taxes," he said.
The BIR, through its Task Force POGO, began its crackdown with the temporary closure of the operations of the Great Empire Gaming and Amusement Corp. (GEGAC) in Quezon City on Sept. 25 for failure to pay the correct amount of taxes to the government.
GEGAC was the first POGO service provider shut down by the BIR under its “Oplan Kandado” program for failing to register for VAT purposes, which is a violation of Section 108 in relation to Section 115 of the National Internal Revenue Code (NIRC). Its satellite offices in Paranaque City and Subic Freeport were also padlocked by the BIR.
After initially paying P250 million, and the issuance of an undertaking to settle its remaining tax arrears of P1.050 billion in three separate monthly payments covered by postdated checks, GEGAC was allowed by the BIR to resume operations last Sept. 27.
GEGAC, one of the biggest POGO service providers operating in the country, was also required to update its withholding tax payments, and register its employees with the BIR.
Last Oct. 17, the BIR also padlocked the head office in Paranaque City, and its branch in Pasay City, of Altech Innovations Business Outsourcing for the firm's failure to register as a VAT taxpayer.
Altech reopened after paying an initial P8.2 million in back taxes and committing to pay the remaining P37 million it owes the government for unremitted withholding taxes of its 390 mostly Chinese workers. Guballa said the BIR was still in the process of assessing the VAT liability of the firm.
Before 2019 ended, the BIR cracked down on the country’s biggest POGO service provider--New Oriental Club 88 Corporation--which was registered as a business providing customers relations services.
While its Makati office was registered, its 11 branches in separate buildings in Paranaque City were not, prompting the BIR to swoop down on these offices last Nov. 27 and shut down their operations.
According to BIR estimates, the company employed about 23,000 foreign nationals for the taxable year ending Dec. 31, 2018. But the company submitted to the BIR an official list of just 6,736 foreign workers.
Last Jan. 17, the BIR closed down the Pasig City branch of Xpoint Technology Philippines Corp. after it was learned that the company was not registered for tax payments. The firm operates at the Ortigas Center, but its main office is located at the Cagayan Special Economic Zone and Freeport.
Guballa said results of the investigation conducted by the BIR Task Force POGO showed that Xpoint is not registered for VAT purposes, as certified by the bureau's Revenue District Office in Tuguegarao City.
To further firm up the Duterte administration’s campaign against delinquent POGOs, Dominguez said he is supporting in principle a plan by Albay Rep. Joey Salceda to impose additional taxes on the online gaming industry.
These taxes includes a 5 percent franchise tax, and a 15 percent tax on the salary of any individual who is a permanent resident of a foreign country and employed by a licensed offshore gaming enterprise.
On Dominguez’s instructions, the BIR is also working with DOLE in developing an interagency database of foreign nationals working in the country to effectively monitor them and ensure that they pay the correct amount of taxes to the government.