A new taxation and oversight regime is in force for foreign-facing online gaming operators (POGOs) in the Philippines, tightening POGO scrutiny and ramping punishment for tax delinquency and labour violations.
The Bureau of Internal Revenue (BIR) on November 26 released its Revenue Regulations No.20-2021 in response to legislation signed into law in September that imposed a 5 percent flat levy on online gross gaming revenue.
The regulations further elevate the ability of the BIR to bypass gambling regulators, particularly PAGCOR, and close down POGOs that fail to pay tax dues or commit other fraud through company non-registration or not applying withholding taxes to foreign workers.
The most impactful of these powers is to close down not only a POGO if it breaches tax requirements, but also the network of agents and service providers associated with it, seemingly marking a major addition to the BIR’s weaponry against illegal operations.
“The implementation of closure orders against [POGOs] and/or [POGO]-Gaming Agents shall necessarily include the closure of all their respective Accredited Service Providers, which must also cease to operate,” the regulations state.
The list of punishments provides for deportation of any foreign employee of a POGO or POGO service provider whose employer fails to apply a new withholding tax of 25 percent of gross income and no less than 12,500 pesos ($248) per month.
Such employees will also be subject to bans on re-entering the Philippines and will join a blacklist maintained by labour and immigration authorities.
Among other punitive measures, POGOs and associated service providers that fail to acquire a Taxpayer Identification Number (TIN) for staff will be fined 20,000 pesos per offence, and could have their licences revoked after referral to “other relevant agencies”.
The measures refer to foreign-facing online gaming operators not as POGOs, as PAGCOR does, but as “Offshore Gaming Licensees”.
The measures instead use the POGO acronym to refer to gaming operations rather than companies; therefore, including offshore gaming licensees and service providers under the banner of “POGO Entities”.
The implementation of the tax measures greatly expands the tax bureau’s ability to monitor and cull wayward online gaming companies after years of quarrelling and litigation with PAGCOR over tax receipts from the industry.
As such, they represent an additional burden to a segment that once dominated the region’s online gaming space, but which has contracted dramatically after pandemic damage, Beijing's attacks on Chinese nationals who gamble with or work for POGOs, and wider Philippine government crackdowns on the industry.