PAGCOR Online Rate Cuts Please Operators, Fuel Casino Growth

September 15, 2023
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Local-facing online gambling interests in the Philippines are more bullish about the future, amid falling taxes and regulator sympathy over encroachment on the sector by illegal operators.
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Local-facing online gambling interests in the Philippines are more bullish about the future, amid falling taxes and regulator sympathy over encroachment on the sector by illegal operators.

The rate cuts, in force from last month across the nascent online space and set to fall twice more by the beginning of 2025, confirm that gambling regulator PAGCOR has considered the complaints of the online sector and moved to shore up operator defences against unregulated activity.

Jade Technologies Entertainment and Gaming Technologies CEO Joe Pisano told Vixio GamblingCompliance on Friday (September 15) that the recent and planned cuts to PAGCOR’s franchise fees for online gambling segments are “a big help” in combating underground rivals.

“We welcome it because it helps us compete with the illegals,” said Pisano, whose company is also licensed to operate in the domestic online space. These online operators, whose customers must register with land-based licensees, are informally known as PIGOs.

“Our biggest problem at the moment here in the Philippines is not competing with other licences, and it’s not regulation, but it’s competing with the illegal operators.”

The reductions also point to PAGCOR backing substantial growth in the domestic-facing remote gaming space after a cautious opening phase of operations. This was confirmed by chairman and CEO Alejandro Tengco in an interview with Vixio during the AIG Academy Summit in Manila on Wednesday.

Pisano said PIGO interests told PAGCOR during various industry consultations that lower rates could mean a more competitive and expansive market.

“We also believe that if we are able to increase our GGR [gross gaming revenue] over the next year, we could see further reductions,” he said.

“What PAGCOR’s looking at is, we’ll help you and with that help you’ll be able to increase your revenue, and the actual amount of tax you’re paying, even though the rate is less, will end up being more.”

He added that PAGCOR has informally notified operators that further cuts are possible if GGR improves, a scenario reflective of the fact that the current rates amendment is the ninth in less than two years.

Pisano said that because the licensing base of online gambling operations remains in land-based gambling facilities, synergy will develop between the sectors.

“The whole concept of PIGO was business continuity during COVID … [and] we’re extending the gaming floor into the online market.

“It’s a great marketing tool for the land-based [operators]. So having that bridge now between the land-based [side] and remote gaming benefits both the retail space and the online space.”

As with its origin in a public health crisis, Pisano said the PIGO regime will allow operator endurance during future crises, a capacity that is important for a country that suffers typhoons and hurricanes. Because of heavy labour and tourism links, the Philippines is also in the strike zone for future pandemics that emerge in China.

Online operations give licensees “that disaster recovery or business continuity plan, in the event of natural disasters or future pandemics. They can keep the operation going,” he said.

Also on Wednesday, two senior executives with casinos based in Clark Freeport confirmed they are expanding into the PIGO space, joining their massive Entertainment City rivals.

Hann Casino senior vice president of operations Dennis Andreacci told the summit that the Hann property is installing six gaming tables for online users, to be operational in 60 days, as well as a “considerable number of slot machines” that will require ten months to launch.

Hann’s smaller rival D’Heights Resort & Casino is also taking the PIGO road, business operations executive manager Eduardo Dacanay said.

For the Clark operators, which are capacity constrained and short on hotel room inventory, the PIGO expansion offers alternative revenue and marketing opportunities.

Pisano also clarified the scope of the 10 percent tax for online operators monitored by PAGCOR’s third-party online auditing mechanism.

“This is 10 percent of the tax rate. If it's 25 percent tax then the monitoring fee is 2.5 percent,” he said.

“Apart from monitoring they are also involved in testing and providing operations compliance certificates.

“No one likes paying fees but it is necessary to keep operators compliant,” he added.

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