PAGCOR Ordered to Pay PHP117M in Deficiency Income Tax by CTA

PAGCOR faces a significant financial obligation.

The Court of Tax Appeals orders PAGCOR to pay PHP117 million in deficiency income tax.

A landmark ruling could redefine fiscal responsibilities for gaming entities in the Philippines.

Delve into the details of this pivotal tax ruling against PAGCOR.

Court’s Decision on PAGCOR’s Tax Liability

The Philippines’ Court of Tax Appeals (CTA) has directed PAGCOR, the gaming regulatory body, to pay a substantial deficiency income tax of PHP117 million (US$2.1 million) for 2005 and 2006.

Breakdown of Deficiency Income Tax Payments

The court’s ruling, issued by Associate Justice Lanee S. Cui-David, outlines specific payments: PHP13.11 million (US$235,500) for 2005 and PHP104.9 million (US$1.88 million) for 2006.

Inclusion of Delinquency Interest

In addition to the basic tax payments, PAGCOR must also settle delinquency interest. This requirement stems from a 2017 Supreme Court decision that remanded the case to the CTA.

Background of the Legal Issue

The tax issue originated in 2008 when the Bureau of Internal Revenue (BIR) assessed PAGCOR for PHP5.92 billion (US$106.35 million). This assessment included income tax, value-added tax, and fringe benefit tax (FBT) for the two-year period.

2017 Supreme Court Ruling on PAGCOR

The Supreme Court’s 2017 ruling partially sided with PAGCOR. It annulled the BIR’s assessment related to gaming operations but clarified tax obligations on revenue from related services.

Clarification on Tax Exemptions

The Supreme Court distinguished that while the Value Added Tax Reform Law (Republic Act 9337) did not revoke PAGCOR’s tax privileges under the PAGCOR Franchise Law of 1983 (Presidential Decree 1869), it did remove the exemption from corporate income tax on non-gaming revenues. The court also noted that FBT is not exempt under these privileges.

Conclusion: PAGCOR’s Fiscal Challenge Ahead

This ruling poses a significant financial challenge for PAGCOR and sets a precedent for the tax treatment of gaming entities in the Philippines. As PAGCOR prepares to comply with the CTA’s mandate, this case highlights the complexities of tax laws and their impact on government-owned and controlled corporations in the gaming sector.