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The Philippines – Bloomberry takes extra tax row to the Supreme Court

By - 8 June 2014

Bloomberry Resorts, the operator behind Solaire in Manila’s Entertainment City, has turned to the Supreme Court in the Philippines to call into question the validity of demands by the Bureau of Internal Revenue (BIR) for income tax of 30 per cent on profits imposed on Pagcor and its licensees.

Bloomberry is arguing that the new tax violates the Pagcor charter and wants a temporary restraining order to prevent the implementation of BIR’s Revenue Memorandum Circular. It claims that the new tax was issued with ‘grave abuse of discretion’ and would discourage investors. It has filed a 23-page petition looking to overturn the tax.

The Bureau of Internal Revenue says new operators must pay corporate income tax derived from their operations relating to their contractual relationships with Pagcor, as well as the five per cent franchise tax. The BIR order stated that: “Pagcor is no longer exempt from corporate income tax as it has been effectively omitted from the list of government-owned or controlled corporations (GOCCs) that are exempt from income tax. Pagcor’s income from its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places, gaming pools, and other related operations are subject to corporate income tax under the NIRC, (National Internal Revenue Code) as amended.”

Lawyer Purisimo Buyco claims that forcing Pagcor’s licensees and operators to pay income tax was “unlawful and unwarranted legislation,” especially taking into consideration that an exemption for this is specifically mentioned in the Pagcor charter.

The fees outlined in Solaire’s provisional casino license include a 15 per cent of gross gaming revenues generated from High Roller Tables, 25 per cent of gross gaming revenues generated from Non-high Roller Tables, 25 per cent of gross gaming revenues generated from slot machines and electronic gaming machines and 15 per cent of gross gaming revenues generated from junket operation. These fees already include the five per cent franchise tax under PAGCOR’s charter.

Bloomberry’s petition claims: “Such unlawful legislation made by the BIR seriously affects national interest as it effectively curtails the basis for the investments in the industry and resulting tourist interest and jobs generated by the industry. It is evident that to impose tax burdens which are not provided for by law would be tantamount to crippling the gaming industry vis-a-vis the ability to compete with established gaming markets such as Macau and Singapore. That provision does not apply to private corporations like BRHI, and that amendment deleted only Pagcor from the list of tax-exempt GOCCs. There was no reference in that provision about Pagcor’s contracting parties, including its licensees. Since there is no reference at all to Pagcor’s contracting parties in RA 9337, the effect of that law cannot apply to the contracting parties of Pagcor such as BRHI,” read the petition.

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