POGOs not an essential sector, only 0.23% of gov’t annual tax revenues

May 4, 2020

by IBON Foundation

Research group IBON said the Philippine Offshore Gaming Operations (POGOs) generate minimal income and employment for the country, contrary to government’s claim that it is an essential sector and should be partially reopened. The group said that the insistence on reopening POGOs appears to be yet another example of partiality towards China. The public interest is better served by giving more attention to public health measures for when the lockdown is lifted, stressed IBON.

The administration recently announced that it will allow the partial reopening of POGOs while the lockdown is ongoing. It claims that POGOs are categorized as business process outsourcing (BPO) which is an essential sector due to its revenue and employment generating capacity.

IBON however questioned the administration’s defense of POGOs as an essential sector. It does not bring in much government income nor job opportunities for Filipinos, said the group.

According to the Bureau of Internal Revenue (BIR), it has collected only around Php6.4 billion from POGOs in 2019, which is not even one-fourth of one percent (0.23%) of the Php2.8 trillion in total tax revenues for the year. The government is not even able to collect the expected Php50 billion in taxes from offshore gaming operators.

Meanwhile, POGO regulatory fees averaging only Php3.8 billion annually in the last five years were a measly 1.5% of the annual average non-tax revenues over the same period. Philippine Amusement and Gaming Corporation’s (PAGCOR) collects these fees, and POGOs only contributed 7.6% to its gross income of Php75.8 billion in 2019. The bulk or 58.1% of PAGCOR’s earnings are from regulatory fees of licensed casinos and electronic gaming sites. Some 34.1% of PAGCOR’s gross income is from its share of tables and electronic gaming machines.

POGOs also avoided paying franchise taxes, added the group. In a Senate hearing last March, the BIR said only 8 out of 11 POGOs pay the 5% Philippine franchise tax.

IBON also explained that POGOs contributed little to the country’s employment because they employ mostly Chinese citizens. January 2020 data from PAGCOR show that more than half or 57.3% of the 188,239 POGO employees are Chinese citizens and 25% from other nationalities; only 17.7% are Filipinos.

PAGCOR has also been touting that POGOs had driven Php25 billion in real estate profits through office space leasing. Its own data however reveal that POGOs are mainly leasing office space in buildings owned by top Philippine oligarchs, noted IBON. One example is PB Com Tower in Makati owned by Lucio Co. PB Com Tower is home to 31 POGOs and POGO service providers.

Additionally, the Yuchengco Tower in Makati is a leasing space for 16 POGO service providers. The Yuchengco Tower is owned by RCBC Realty Corporation, a subsidiary of RCBC. It could be recalled that RCBC was put into controversy in 2019 due to its ex-bank manager being found guilty of money laundering in connection with the US$81 million cyber heist on Bangladesh’s central bank. IBON found that in RCBC’s May 2019 disclosure to the Securities and Exchange Commission (SEC), one of the banking corporation’s independent directors from 2016 to present, Gabriel Claudio, is also serving as a director at PAGCOR.

IBON said that if government is really sincere in addressing the COVID-19 pandemic, it should prioritize improving the country’s testing capacity and isolation of COVID-19 cases over reopening businesses such as POGOs. The group added that improving the country’s health system would have avoided a longer lockdown. Moreover, IBON said that if the government focused on productive sectors such as agriculture and manufacturing, the Philippine economy could jumpstart faster rather than depending on the piddling contribution of POGOs. ###