Is the Philippines Market Going to Make It? Delay of Tax May Not Sway OperatorsPublished January 23, 2021 by Lee R
Delaying an unsightly new tax sheds light on the greater problems in the Philippines market.
A new tax break provides an incentive to stay in the Philippines, but does not erase the shadow of doubt over the Philippines market.
The Argument Against
A stringent franchise tax was delayed by the Philippines Supreme Court by a 13-1 vote in favor of petitioning industry representatives who argued the tax patently violated “substantive due process and equal protection of the law” for both local operators and foreign organisations further subject to the provisions.
Leading the petitioners were representatives from Oriental Game; Golden Dragon Empire; and Riesling Capital.
The Pain of the Tax
The original levy of 5% on gross bets was seen as the final nail in the coffin for POGO operators sinking under the oppressive weight of pandemic-based business shutdowns.
Leaving the Fold
The government had sought out the tax as part of a push to double gambling revenues as an economic recovery solution—with the local industry in urgent need of one in light of only 35 out of 61 local operator POGOs resuming operations.
Drop in the Bucket
The temporary delay on the tax levy minimizes the comfort zone. Pundits remain concerned that the stay of execution will keep current POGO operators in, but will not encourage any more returns or new entries.
Leading operator Cherry Interactive representative Danny Too sees the vote as the Philippine government's acknowledgment of “the 5 percent turnover tax is a suicidal move, akin to killing the golden goose.”
Too further expresses his concern that the move is far too little too late, and the landscape has already driven away the economically vital Chinese operators to focus on different markets elsewhere.
The Problem with the Tax
The main problem from an industry standpoint is the tax was imposed on gross bets, rather than revenue, which makes it almost impossible to turn a profit.
Even with PAGCOR chair Andrea Domingo providing data indicating the sector is recovering, the hint alone of a gross profit tax is likely to drastically reduce the appeal if not the yield of the once thriving Philippines market.