POGO, POGO and more POGO stories seem to be flooding everyone’s news feeds. As the troubled industry generates news that ranges from controversial at best to illegal at worst, it would be good to know more about POGOs and how they affect us. The short answer is — in more ways than we may realize.
POGOs or Philippine Offshore Gaming Operators (now going by the name Internet Gaming Licensees), offer gaming in the Philippines to virtual customers placing bets online. E-casinos and sports betting sites are types of POGOs. However, contrary to popular belief, POGOs do not actually cater to players or bets placed within the Philippines. Bets and payouts are made overseas through the operators’ chosen financial institutions. Limiting the players to foreigners ensures that Filipinos are protected from the negative effects of gambling. In fact, while Republic Act (RA) No. 11590 (the law taxing POGOs) recognizes legal forms of gambling, including offshore gaming, it declares that such a recognition cannot be construed as the State endorsing such activity.
POGO licenses are mainly issued by the Philippine Amusement and Gaming Corp. (PAGCOR), which has a legal mandate to license games of chance, card games, and number games, to generate revenue for the government’s socio-civic and national development programs and help promote tourism. In the past, freeport authorities like the Cagayan Economic Zone Authority (CEZA), the Aurora Pacific Economic Zone and Freeport Authority (APECO) and the Authority of the Freeport Area of Bataan (AFAB) were granted, under their respective charters, the power to operate or approve licenses to operate gambling businesses, including POGOs. However, this power has since been curbed by RA No. 11590.
Currently, there are two main types of offshore gaming licensees in the Philippines. They are Philippine-based POGO Licensees or Foreign-based POGO Licensees. Foreign-based POGO Licensees must have an appointed Local Agent which has to be PAGCOR-accredited. POGO sites in the Philippines must comply with PAGCOR regulations — for instance, they must not be in a residential area, and must have a maximum floor area of 25,000 square meters.
The Philippines started regulating POGOs in 2016. It was seen as a new source of revenue by the then administration, subject to regulation by gaming regulators and operators, PAGCOR and other mandated economic zones. On Sept. 22, 2021, RA No. 11590 otherwise known as the Act Taxing Philippine Offshore Gaming Operations, was signed into law, amending the Tax Code to include sections on taxing POGOs. Notable provisions are the corporate income tax of 25% on non-gaming revenue, final withholding tax of 25% on the gross income of alien employees, and gaming tax of 5% of their gaming income.
In 2023, P5 billion in PAGCOR revenue came from legitimate POGOs, leading PAGCOR to take the position that the industry helps provide jobs and livelihoods.
However, POGOs have again recently been attracting controversy for illegal activities conducted within their premises. Residents near POGO establishments have also expressed alarm about the establishments serving as breeding grounds for crime and human rights violations. Immigration violations are also a concern with foreign nationals employed by POGOs apparently illegally entering and residing in the Philippines. Add to these the potential national security concerns, many are now calling for a total ban of POGOs.
Nevertheless, PAGCOR reiterates that licensed POGOs are legal. It stresses that entities must go through a rigorous licensing process and satisfactorily demonstrate their fitness to hold such licenses like any other business. They are also closely monitored by the regulator.
PAGCOR has released a revised regulation for POGOs known as the Internet Gaming Licensing Regulations, which have the aim of strengthening and maintaining the highest standards of integrity for POGOs. The regulations took effect on June 12, 2023. Significant provisions require that licensees must have a capital of P100 million, of which P25 million must be paid up. Licenses are also valid for only two years and are site specific.
It appears, however, that the new rules have not managed to cull questionable activities. As such, on Sept. 19, 2023, the Senate Committee on ways and means issued Committee Report No. 136 calling for a total ban of POGO as a crime-prevention measure. In fact, as early as 2022, a cost-benefit analysis conducted by the Department of Finance (DoF) found that costs associated with enforcement and immigration relating to POGOs resulted in a net cost of about P3.3 billion to P14 billion annually.
On May 21, Senator Sherwin T. Gatchalian, filed a bill seeking to outlaw and prohibit offshore gaming operations, noting the industry’s involvement in human trafficking and scams. The bill seeks to repeal RA No. 11590 which effectively legitimized POGOs by amending the Tax Code. On June 5, 2024, Senator Anna Theresia N. Hontiveros expressed her support for a total POGO ban, citing national security concerns and the industry’s connection to money laundering. Recently, Rep. Francisca L. Castro filed House Bill 10525 or the Anti-POGO Act of 2024, which calls for licenses of current operators to be revoked and criminalizes their operations, citing the crimes associated with the industry such as murder, illegal recruitment, prostitution, illegal detention, inhumane labor practices and bribery of immigration officials.
After all is said and done, the latest commotion involving POGOs might just be the wakeup call to further examine the legal and social issues brought in by the industry that will allow us to finally answer the question: stay or go?
The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.
Vhalerie Buluran-Reyes is a senior associate at the Tax department of Isla Lipana & Co., the Philippine member firm of the PricewaterhouseCoopers global network.
vhalerie.buluran-reyes@pwc.com
