PAGCOR pushing to redistribute franchise tax to cities with self-run casinos

The Philippines’ Bureau of Internal Revenue (BIR) says it is opposed to a proposal from gaming regulator PAGCOR to redistribute almost half of its annual 5% franchise tax contribution to local government units (LGUs), describing it as a “huge part of the pie”.

According to a report by the Inquirer, PAGCOR is seeking to redirect 2% of its franchise tax payments to LGUs that host PAGCOR-operated casinos.

However, BIR representative and lawyer Ralbert Tibayan has told a hearing of the House of Representatives Committee on Games and Amusements that such a move would have a significant impact on its coffers.

“We oppose the suggestion of Pagcor … 2% is a huge part of the pie and our collection will decrease,” Tibayan said.

At present, the relevant LGUs receive less than 1% of PAGCOR’s annual income while the BIR collects 5% of revenues, leaving a massive disparity. The Inquirer said LGUs were granted just Php451.7 million (US$8.2 million) last year while the BIR collected Php2.75 billion (US$50.3 million).

Under PAGCOR’s model, the LGUs would have received Php1.1 billion (US$20.1 million) and the BIR Php1.65 billion (US$30.2 million).

Under Philippines law, PAGCOR is required to provide 5% of its revenue to the BIR as franchise tax, 50% of the remaining amount to the National Treasury as the National Government’s mandated income share, and 5% of the remaining amount after previous deductions to the Philippine Sports Commission to finance the country’s sports development programs.

It also provides 1% of its net income to the Board of Claims – an agency under the Department of Justice to compensate victims of wrongful detention and prosecution – while cities hosting PAGCOR casinos are given fixed amounts for their respective community development projects.

It has been suggested that 10% of PAGCOR’s annual revenues should be put towards the proposed Maharlika Investment Fund – a sovereign wealth fund that if established would see the government invest into financial markets and large-scale infrastructure projects around the world.