Online gambling which involves playing casino games or placing bets on sports events using the Internet has gained popularity in the Philippines due to its accessibility and convenience. This trend has had a significant impact on the Philippine government’s revenue sources with taxes playing an important role in funding public services such as education, healthcare, and infrastructure.
The rise of online gambling has led to an increase in tax revenue for the government, but it has also posed challenges in terms of tax collection given the difficulty of monitoring online gambling activities.
In this article, we will explore the impact of online gambling on tax collections in the Philippines.
Background Of Online Gambling In The Philippines
Online gambling was legalized in the Philippines in 2000, with the passage of Republic Act No. 9287. This law allows the Philippine Amusement and Gaming Corporation (PAGCOR) to regulate and license online gambling operators. Under Philippine law, online gambling operators must obtain a license from PAGCOR before they can offer their services to Filipino players.
The licenses are subject to annual renewal and operators are required to pay taxes to the government. According to the Philippine Amusement and Gaming Corporation (PAGCOR), the industry’s Gross Gaming Revenue (GGR) in 2023 is expected to reach P244.84 billion. This is a 14% increase from the P214.34 billion GGR generated in 2022.
The increase in GGR is attributed to the continued growth of the Philippine gaming industry which has been driven by the reopening of the country’s borders to local and foreign tourists. The opening of the country’s borders has allowed more people to visit casinos and other gaming establishments, which has led to an increase in gaming activity.
How Does Online Gambling Affect Tax Collections In The Philippines?
In the Philippines, taxes are collected by the Bureau of Internal Revenue (BIR). The country has a progressive tax system which means that the more income an individual or business earns, the higher the tax rate they are required to pay. Online gambling operators in the Philippines are subject to several types of taxes, including corporate income tax, value-added tax, and franchise tax.
These taxes are based on the operator’s gross gaming revenue. The Philippine government is expected to collect P76.2 billion in taxes from online gambling in 2023, according to the Department of Finance. This is a significant increase from the P2.38 billion in taxes collected in 2018, P6.4 billion in 2019, and P7.18 billion in 2020.
The increase in tax collections is due to the growth of the online gambling industry in the Philippines. The industry is expected to continue to grow in the coming years, as more and more people turn to online gambling for entertainment and to make money.
Challenges In Tax Collection From Online Gambling
Here are some challenges that tax authorities face when collecting taxes from online gambling:
Difficulties In Monitoring Online Gambling Activities
One of the challenges in tax collection from online gambling is the difficulty in monitoring the activities of offshore operators. Many online gambling operators are based in other countries and are not subject to Philippine tax laws.
Lack Of Cooperation From Offshore Online Gambling Operators
Some offshore online gambling operators are not willing to cooperate with the Philippine government in terms of tax collection. This makes it difficult for the government to ensure that they are paying the correct amount of taxes.
Inadequate Legal Framework For Online Gambling Taxation
The legal framework for online gambling taxation in the Philippines is still developing. There are concerns that some operators may be able to exploit loopholes in the law to avoid paying taxes.
Efforts To Improve Tax Collection From Online Gambling In The Philippines
The Philippine government has taken steps to address this issue and improve tax collection from online gambling. Some of these include:
Implementation Of Stricter Regulations And Penalties
One of the ways the Philippine government has tried to improve tax collection from online gambling is by implementing stricter regulations and penalties. In 2019, the Philippine Amusement and Gaming Corporation (PAGCOR) issued stricter regulations on online gambling operators, including requiring them to submit regular financial reports and pay higher taxes.
The government has also increased penalties for operators who do not comply with these regulations, including fines and the revocation of their licenses.
Strengthening Of The Legal Framework For Online Gambling Taxation
To further improve tax collection from online gambling, the Philippine government has strengthened the legal framework for online gambling taxation. In 2020, the government passed the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, which includes provisions for online gambling taxation.
Under this law, online gambling operators are subject to a 5% tax on gross gaming revenue, in addition to other taxes and fees.
Final Thoughts
The impact of online gambling on tax collections in the Philippines has been significant, with the industry contributing billions of pesos in taxes each year. However, collecting taxes from online gambling operators can be challenging due to the nature of the industry.
The Philippine government has taken steps to address this issue by implementing stricter regulations and penalties, strengthening the legal framework for online gambling taxation, and cooperating with other countries to monitor online gambling activities.