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Gaming industry cheers SC decision on taxing PAGCOR revenues

Share prices of listed casino gaming operators rallied on Friday, a day after a Supreme Court decision exempting the gambling revenues of Philippine Amusement and Gaming Corp. (PAGCOR) from corporate income tax.

The biggest winner is Bloomberry Resorts Corp., the operator of Solaire Casino and Resorts, whose shares soared by 3.72 percent to P11.72 apiece from P11.30.

Shares of Sy-led Belle Corp. recorded a 1.38 percent increase to P4.41 apiece from P4.35. Through subsidiary Premium Leisure Corp., Belle co-owns the recently opened City of Dream Manila in PAGCOR’s Entertainment City Manila.

Alliance Global Group Inc. gained 0.60 percent to P25.20 apiece from P25.05. Together with Malaysia’s Genting Group the Andrew Tan-led company operates Resorts World Manila.

The Supreme Court decision is plus factor for the Philippine gaming industry, an analyst said, noting this is also good in terms of “perception” of investors as gambling regulator PAGCOR implemented measures to protect industry from the Bureau of Internal Revenue (BIR).

“PAGCOR already moved to dampen the effects of the original BIR ruling, kaya walang net effect. It’s only perception,” Eagle Equities Inc. president Joseph Roxas told GMA News Online.

Following such sentiment is Belle Corp. CFO Manuel Gana who said that PAGCOR has cut license fees by 10 percentage points “to insulate us from corporate income tax.”

“Eventually, I would expect it’s going to be neutral for us regardless of what happens. Once everything’s final, quite possibly, PAGCOR will raise license fees from where they were,” he noted.

The Supreme Court on Thursday ruled that PAGCOR’s income from gaming operations can only be subjected to a 5-percent franchise tax, and not to the much heftier 30-percent corporate income tax.

In a separate statement, PAGCOR noted the Supreme Court decision “affirms what is provided under the PAGCOR charter, Presidential Decree 1869 as amended by Republic Act 9487.”

The regulator derives its incomes from two sources: operations under its core franchise, and operations involving other necessary and related services.

In April 2013, the BIR issued a memorandum circular saying PAGCOR and its licensed casino operators are subject to the 30 percent corporate income tax instead of the 5 percent franchise tax on gross gaming revenues.

The bureau claimed the tax scheme stems from Republic Act 9337, or the Expanded Value-Added Tax Law, which removed PAGCOR from the list of government-owned or controlled- corporations that are exempted from the corporate income tax.

But PAGCOR’s income from casino operations, dollar pit operations, regular bingo operations and mobile bingo operations with agents on commission basis are subject to income tax.

However, Gana said the SC decision is not yet final. “BIR may still file for a motion for reconsideration,” he said.

Asked for a reaction, BIR Commissioner Kim Henares declined to comment.

Until PAGCOR gives industry players an official notice of what happens now, Gana said things go as usual.

“The case is between PAGCOR and BIR. We are indirect participants as we get our guidance from PAGCOR,” he noted.

– VS, GMA News

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