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SC Declared 5% POGO Franchise Tax Unconstitutional
SC Declared 5% POGO Franchise Tax Unconstitutional

SC Declared 5% POGO Franchise Tax Unconstitutional in the Philippines

The Supreme Court (SC) has declared a provision unconstitutional, together with several revenue circulars demanding a 5% franchise tax on gross bets or turnovers from Philippine Offshore Gaming Operations (POGOs).

SC has declared in a 42-page decision that Section 11(f) and (g) of the Bayanihan 2 Law are unconstitutional, stating that these sections violated the “one subject, one title rule” of the Constitution.

Section 11 cites a 5% franchise tax based on the gross bets or turnovers earned by POGOs.The provision explains that revenues will be collected after two years or when COVID-19 has already been contained. 

SC noted, “The imposition of new taxes, camouflaged as part of a long list of existing taxes, cannot be contemplated as an integral part of a temporary COVID-19 relief measure. Invariably, Section 11(f) and (g) of the Bayanihan 2 Law are unconstitutional, in so far as it imposes new taxes on POGO licensees.”

As a result, SC declared invalid RR No. 30-2020 and RMC No. 64-2020, which were issued in order to execute Section 11 of the Bayanihan Law for having no legal basis.

Revenue Memorandum Circular 102-2017 and Revenue Memorandum Circular 78-2018 were also declared null and void “in so far as they impose franchise tax, income tax, and other applicable taxes upon offshore-based POGO licensees.”

The court mentioned that Republic Act 11590 or an Act Taxing POGOs could not be applied retroactively.

The court noted, “All in all, before the reenactment of RA No. 11590, there is no valid law which imposes taxes upon POGOs, including offshore-based POGO licensees. However, this Court deems it proper to emphasize that RA 11590 cannot be applied retroactively.”

In addition, the SC cited, “Thus, POGOs, including offshore-based POGO licensees such as the petitioners, cannot be made liable for taxes prior to the enactment and effectivity of R.A. No. 11590.”

The decision was publicized on December 7, 2021. However, it was released only on September 21, 2022.

Senate President Juan Miguel Zubiri, one of the sponsors of the Bayanihan 2 Law, stated that they respect the SC’s decision. However, he added that the issue might have been rendered debatable by the passage of RA No. 11590. Regardless, Zubiri called the government to look at the POGO policy. 

Zubiri noted, “We have to undertake an in-depth review of the pros and cons of allowing POGOs to operate in our country in light of the recent spate of abduction cases and other established negative social costs.”

Senator Sherwin Gatchalian also cited RA 11590, stating that the case is “moot and academic already.”

On the other hand, former Senate President Vicente Sotto III mentioned that the law was approved during the peak of the COVID-19 pandemic.

Sotto explained, “That law was conceived and passed during the height of the pandemic. We gave due consideration to that and I wish the judiciary gave it the same concern.”

In the meantime, House ways and means chairperson Joey Sarte Salceda who authored the RA 11590, affirmed the act’s validity. 

Salceda cited, “With the recent Supreme Court decision, RA 11590, or the POGO Tax Law undoubtedly becomes part of the law of the land. This is the strictest, most brutal tax law ever imposed on any sector, and I am proud of our work on that law.”

Salceda stated that from January to October, the POGO tax collection reached ₱300 Million after the implementation of the law, the collection jumped to ₱410 Million monthly throughout the rest of 2021. 

Moreover, Salceda warned that closing down the POGO industry would cause serious harm as it may lead to an underground sector.

Salceda mentioned, “That is why we need to close down illegal POGOs and enforce the law. Legal POGOs already comply with the strictest tax provisions ever included in the Tax Code. If you close down the legal POGOs, you only incentivize the underground POGOs.”

In addition, he noted, “As I have emphasized over the week: enforce the law. Don’t burn down the whole house just to kill the rat. Especially when, judging from PAGCOR itself, the rat seems to be outside the house anyway.”

Meanwhile, Senator Joel Villanueva stated that the government must reevaluate the policy regarding online gambling. 

Villanueva cited, “The question remains: does [the] revenue the government generates from POGOs outweigh the social costs of online gambling? We filed Senate Resolution No. 225 precisely to investigate this matter, in the wake of the rising criminal activities that involves POGOs.”

Meanwhile, Senator Risa Hontiveros noted that she does not see any grounds on why POGOs should not be banned with the decision of the Court.


  • Claire Feliciano

    Marie Claire Feliciano is a Senior Digital Copywriter. She focuses on writing SEO content such as blogs, infographics, and news articles.

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