Walls closing in on the POGO business
Credit to Author: Ben Kritz| Date: Mon, 09 Dec 2019 16:15:59 +0000
IN a surprise move over the weekend, Makati Mayor Abby Binay launched what appears to be a crackdown on the Philippine offshore gaming operator (POGO) business in her city, announcing that Makati would indefinitely suspend the issuance of new business licenses and permits to POGOs.
The mayor’s statement, issued on Sunday, said that effective immediately, the city will stop issuing “Letters of No Objection” and would not accept applications for business permits from POGO service providers until further notice.
The statement cited rising prostitution and criminality associated with the POGO business in Makati and a spike in property rates as reasons for the moratorium.
According to a report by CNN, there are currently about 300 POGO businesses in Makati, most of which are staffed by Chinese nationals. The city collected an estimated P200 million in taxes from POGOs last year, but has been bedeviled by unwelcome side effects of the business. In just the past two months, the city has shut down four illegal POGO service providers, raided two prostitution dens allegedly set up and patronized by Chinese nationals, and seized P2.5 billion in illegal drugs from an apartment rented by a Chinese national.
Duterte and BIR’s moves
Makati’s move is the latest in a series of tentative steps taken by the government to curb the runaway growth of the POGO sector. In June, President Rodrigo Duterte imposed a moratorium on the creation of new economic zones in Metro Manila, a decision he said was meant to encourage more investment in the provinces but came at a time when public grumbling about POGOs was growing in volume. Then in September, the Department of Finance ordered the Bureau of Internal Revenue to shut down POGOs that failed to pay delinquent tax liabilities, which at that point were estimated to be about P21.7 billion.
That, however, led to the extremely unwelcome discovery that most POGOs are taking advantage of a gap in the Philippines’ tax code that allows them to avoid paying income taxes. More intensive efforts to “do something” about the POGOs either get rid of them or at least make them pay fairly for the privilege of operating here have followed that revelation, including the filing of legislation that would specifically tax POGOs and their workers, and this latest decision to put a halt to the expansion of the POGO business in Makati.
What is remarkable about the growth of the POGO business is that it has occurred within the term of a president who has on several occasions expressed his distaste for gambling, has issued dark warnings to supposedly corrupt government officials and employees in both Pagcor (the Philippine Amusement and Gaming Corp.) and the PCSO (Philippine Charity Sweepstakes Office), and at one point earlier this year took the drastic step of ordering a complete shutdown of PCSO’s lottery operations. One speculation of why President Duterte has not acted in character toward the POGOs in spite of a growing wave of public resentment toward the phenomenon is that the Chinese government, which is not at all ambiguous about its wish to put a stop to it, made a diplomatic error in issuing a pointed public suggestion that the Philippine government ought to ban gambling altogether.
Although President Duterte is friendly toward China, the request on their part was pushing congeniality just a bit too far, and the President has held back on acting more forcefully toward the POGOs in order to remind them of proper boundaries.
Of course, only the President can say what he really thinks of the issue, and it is becoming contentious enough that he probably should. While the POGO sector is not completely without benefits the property sector has enjoyed a bonanza in areas where POGOs have located, and Pagcor and other POGO advocates point to assumed gains for retail from the influx of imported Chinese workers the general perception is that these come at a cost that completely negates them. Filipino residents and businesses are being displaced from their own communities; growth in the business process outsourcing sector which primarily employs local workers is being restricted by the POGOs’ out-competing them for space; and as the Makati City government has discovered, POGOs bring a certain amount of social degradation to areas they populate.
Congress has taken the step to try to close the loopholes that allow POGOs to operate without paying corporate income taxes, but so far no one has been bold enough to propose banning them outright, which is the logical step to take. Public disapproval does not seem to be making much of an impression on the country’s lawmakers it rarely does so perhaps the President, better attuned to the public mood than those in Congress, can prod them to action.
ben.kritz@manilatimes.net
Twitter: @benkritz