After a year of deliberations, gaming regulators in the Philippines have finalised a framework to offset the adverse impact of a mandated shift in the tax regime on the gaming industry.
The Philippine Amusement and Gaming Corporation (Pagcor) has announced a 10 percent adjustment in licence fees on developments at Entertainment City in Manila. The gaming industry seems satisfied with the solution, which addresses the additional exposure to corporate income tax brought about by Bureau of Internal Revenue (BIR).
In April 2013, the BIR issued a memorandum circular saying Pagcor and its licensed casino operators are subject to the 30 percent corporate income tax instead of the 5 percent franchise tax on gross gaming revenues, removing an exemption given to four operators developing casinos in Manila Bay.
Gaming operators had claimed that according to their provisional licences the licence fees that are paid to Pagcor were “in lieu of all taxes”. In a statement, Pagcor said it has entered into an agreement to adjust the fees “commencing April 1, 2014 by ten percentage points of gross gaming revenues”.
BIR Commissioner Kim Henares was quoted by Philippine media as saying that he is yet to see a copy of the agreement. “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,” Mr Henares was quoted as saying on Monday.
In a separate statement, Melco Crown Philippines said: “Such solution not only preserves for the Philippine Government the financial benefits that it already derives from the provisional licences but also validates Pagcor’s commitment to uphold and abide by the terms of the provisional licence.”
“We welcome this initiative and express our sincerest gratitude to the government of the Republic of the Philippines and Pagcor for their continuous support in helping us realise our gaming, leisure and entertainment complex in Manila,” Clarence Chung, chairman and president of Melco Crown Philippines, said in the statement to the Philippine Stock Exchange.
The 10 percent licence fee adjustment is perceived as a temporary measure to address the BIR action “and is not intended to modify, amend or revise the provisional licences,” Pagcor said. The parties agreed to revert to the original licence fee structure in the event the BIR action “is permanently restrained, corrected or withdrawn”.
Casinos at Entertainment City are being developed by Bloomberry Resorts and Hotels Inc, MCE Leisure (Philippines) Corp, Travellers International Hotel Group Inc and Tiger Resorts Leisure and Entertainment Inc.
Bloomberry operates Solaire Resort and Casino and is currently expanding the development. Melco Crown Philippines, a subsidiary of Macau’s casino operator Melco Crown Entertainment Ltd, aims to open its City of Dreams Manila in the third quarter of 2014.
The Philippine gaming market had gross revenue of US$2.2 billion last year, a 10 percent growth from 2012, according to figures from Pagcor.
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Vice-chairman at Macau casino operator Galaxy Entertainment Group