October 3, 2022

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POGO revenue well below forecast at P4.4 billion

THE Bureau of Internal Revenue (BIR) said on Monday that taxes generated by the Philippine Offshore Gaming Operator (POGO) industry amounted to P4.4 billion in the eight months to August, up from the P3.91 billion collected over the full year in 2021 but significantly lower than the bullish pre-pandemic projections for the industry.

The Department of Finance (DoF) had expected a law regulating POGOs to raise P32.1 billion in 2021, on the assumption that operations will return to pre-pandemic levels.

“However, contrary to the lofty expectations, POGO entities have not returned to the Philippines and the number of foreign nationals employed by POGOs has not equaled pre-pandemic levels but has drastically decreased,” the DoF said. Registered POGOs have declined steadily to 163 from 191 in 2021, 244 in 2020 and 281 in 2019.

The number of workers in the POGO industry has risen to 34,245 at the end of August from 30,583 in 2021, though the total was well below the 42,385 tallied in 2020 and 144,605 in 2019.

The DoF said the industry has fled the Philippines because of tax rules and the Chinese government’s hostility to all forms of gambling.

At a Senate Ways and Means Committee hearing, the Philippine Amusement Gaming Corp. (PAGCOR) reported income of P1.912 in the eight months to August, putting it behind the pace of previous years. It generated P3.47 billion in 2021, P5.28 billion in 2020, and P8.02 billion in 2019.

The DoF said in a letter to the Senate dated Oct. 3, that POGOs’ “modest contribution to the economy does not outweigh the social costs of (their) continued operations, especially (with the) alarming increase in undesirable criminal activities. It estimated that the industry accounted for 0.03% of gross domestic product in 2021 and the current year.

According to the Philippine National Police, POGO-related crimes included prostitution, the employment of minors, violations of labor law, and kidnapping.

The Anti-Money Laundering Council has reported that POGOs and service providers are a money laundering risk given that the financial transactions of internet-based casinos are based on opaque remittance.

“This can frustrate the government’s efforts to get out of the Financial Action Task Force grey list by January 2023,” the DoF said.

The Philippines, it added, may be exposed to reputational risk by allowing the industry to operate even as it remains illegal in China, and is at any rate in position to tap other forms of investment.

“We have (prepared) the ground for foreign direct investment to come in through economic liberalization measures and by modernizing our tax incentives system through the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act,” the DoF said.

“It is time to pursue investments that will create value and high-quality jobs for our people, in line with our vision of an inclusive and sustainable economic development,” it added.

Senator Mary Grace Natividad S. Poe-Llamanzares said the Philippines must turn away from offshore gambling.

“This is an opportune time to weigh whether the POGO industry plays a significant role in our bid for economic recovery and growth,” she said.

“We need to have the policy framework and the political will to invite strategic investment from industries that are actually worthy of our focus,” she added. — Alyssa Nicole O. Tan