Supreme Court supports POGO’s opposition to 5% tax
POGO have won their court battle against the 5% tax after the Supreme Court of the Philippines ruled against the franchise tax. In June of 2020, a House leader said that POGOs were not exempt from paying the mandatory 5% franchise tax.
According to Robert “Ace” Barbers – Surigao del Norte 2nd District Representative at the time, the Philippine law apparently does not distinguish between domestic and foreign operators.
He claimed that non-SEC registered POGOs still usually rent, lease or buy offices in the Philippines and they also hire locals as their employees, therefore possessing a physical presence in the country and being eligible to pay the tax.
However, these calls to impose the franchise tax by Robert “Ace” Barbers and other Senators such as Franklin Drilon and Leila De Lima, who both demanded the collection of P50 billion in unpaid taxes, were brushed off as the Supreme Court voted in favor of POGO, against the Bayanihan 2 Act.
Because of this new ruling, 13-1, the Supreme Court has ordered a temporary restraining order on the 5% franchise tax.
This is not the first issue concerning tax and POGOs that we are witnessing in the Philippines, as back in 2018 the Office of the Solicitor Generals (OSGs) announced that since POGOs’ majority income comes from outside of the Philippines, they could therefore not be taxed. Most senators were against the OSGs claims and argued that POGOs should be taxed, as any other business is.
POGOs contribute heavily to the Philippine economy, and their exodus had a massive negative impact since POGOs had covered an estimated 11% of total leasable office space in Metro Manila, or about 1.34 million square meters, effecting the real estate market.
The Philippine economy somewhat relies on POGOs, and a mass exodus of them that we have seen in 2020 carries a massively negative effect on the economy. POGOs had covered around 11% of total leasable office space in Metro Manila, or about 1.34 million square meters, which greatly affected the real estate market.
The POGOs provide thousands of job opportunities to the Philippine’s population, so the suspension of this tax hike may be a blessing in disguise not only for POGOs, who will surely profit from paying less tax, but also for the Philippine government because income tax will still be gathered and 10s of thousands of people will not be losing their jobs.