Pagcor, casinos agree on temporary solution to BIR tax issue

Posted at 05/12/2014 10:53 AM | Updated as of 05/12/2014 5:57 PM

MANILA (UPDATE) – The Philippine Amusement and Gaming Corporation (Pagcor) has agreed to reduce the license fees for the big casinos at Entertainment City, as a way to address their concerns over the Bureau of Internal Revenue's (BIR) imposition of corporate income tax on their operations.

In a statement, Pagcor said it has entered into an agreement with the four Entertainment City licensees -- Andrew Tan-led Travellers International Hotel Group, Inc., Enrique Razon's Bloomberry Resorts and Hotels, Inc., SM and Melco Crown-led MCE Leisure (Philippines) Corporation, and Kazuo Okada's Tiger Resorts Leisure and Entertainment, Inc. -- on the adjustment of license fees.

"Recognizing that Article IV, Section 20 of their provisional licenses expressly provides that the license fees that are paid to PAGCOR are 'in lieu of all taxes,' PAGCOR and the licensees have agreed to adjust the license fees commencing April 1, 2014 by ten percentage points (10%) of gross gaming revenues," Pagcor said.

The move by Pagcor will address the BIR's Memorandum Circular 33-2013, dated April 17, 2013, which states that all earnings of Pagcor from its operations and licensees are subject to the 30 percent corporate income tax, instead of the 5 percent franchise tax on gross gaming revenues.

However, Pagcor said adjustment in license fees is only a temporary measure to address the BIR's "unilateral" action and will not modify the provisional licenses.

Pagcor also emphasized the reduction in license fees is not an admission of the validity of the BIR order.

"The parties agreed to revert to the original license fee structure under the provisional licenses in the event the BIR action is permanently restrained, corrected or withdrawn," it said.

BIR Commissioner Kim Henares, meanwhile, said the agency has yet to see a copy of the agreement, but noted that it “has no bearing” on tax laws.

"Cannot really comment on whatever agreement Pagcor entered into with their licensee. Have not seen the agreement nor were we provided with a copy. But whatever agreement they have, that is a private agreement between them and has no bearing with what the law requires of everyone, which is to pay for the taxes they are liable for," Henares said on Monday.

In a separate statement, Melco Crown Philippines chairman and president Clarence Chung welcomed the agreement with Pagcor.

"The development of City of Dreams Manila is progressing well and we firmly believe our integrated leisure and entertainment destination resort will play a key role in furthering the ambitions of the Philippines in establishing the country as a major leisure and tourism destination in the region," he said.

City of Dreams Manila is expected to open later this year.

At present, only Bloomberry's Solaire Casino & Resort is operating at the Entertainment City.

The Philippines is betting that Entertainment City will become the next gaming hub in the Asia-Pacific region.