By Bloomberg, Bernie Cahiles-Magkilat and Chino Leyco
China urged the Philippines to stop its casinos from hiring Chinese citizens as part of a wider crackdown on cross-border gambling and illegal funds flow, a move seen to hurt the country’s property companies.
Megaworld Corp. led decliners in the property sector after a statement on the Chinese embassy website in the Philippines said overseas gambling by Chinese is illegal, as is opening casinos overseas to attract Chinese citizens.
A large number of Chinese citizens have been “illegally recruited and hired” in the Philippines, while “hundreds of millions of Chinese yuan” have illegally flowed to the Philippines, the statement said.
The remarks are the strongest warning from China against the Philippines’ flourishing casino sector that’s targeting and also employing tens of thousands of its citizens.
More than 50 Philippine Offshore Gaming Operators or POGOs have received licenses since 2016, and the industry that caters mainly to overseas Chinese punters employs about 138,000 mostly Chinese workers.
Oriental Group, one of the operators licensed by the Philippine Amusement and Gaming Corporation (Pagcor) is building online gaming hubs in Cavite City in the south and in Clark City in the north.
Megaworld shares fell 2.1% at the noon trading break in Manila. Shares of Belle Corp. and SM Prime Holdings Inc. dropped 0.9% and 0.8%, respectively. The Philippine property index erased gains and was little changed at noon.
“Obviously, the biggest impact will fall on the property sector, especially the big names with a significant portion of their net income derived from POGO leasing,” said Rens Cruz, an analyst at Regina Capital in Manila.
Senator Joel Villanueva on Thursday said the government should consider national security concerns in regulating POGOs.
Pagcor was reported to have plans to “contain” Chinese and other foreign workers in POGOs in hubs to limit their interaction with Filipinos.
While the move, according to Villanueva, seems to strengthen the government’s control of the POGOs, issues on its security and economic implications have yet to be addressed.
“Putting them in hubs may create a perception of greater regulatory control for the government, but the issues of national security, money laundering and greater economic impact for Filipinos have not been addressed,” he added.
Senator Sherwin Gatchalian, in a tweet, also slammed the Pagcor’s plan as an attempt to hide the POGO workers from public scrutiny.
“PAGCOR is missing the point: we want POGO operators and their employees to pay the correct taxes and not eat local jobs that are exclusive for our people. Isolating [them] in ‘hubs’ will not bring additional revenue for government. Tinatago mo lang sila (You will just hide them),” Gatchalian wrote.
Business group backs crackdown
The Chamber of Commerce of the Philippine Islands (CCPI), the country’s oldest business organization, yesterday stressed the need to put controls on the entry of Chinese workers in the country, particularly in the online gaming sector.
Jose Luis Yulo Jr., CCPI president, said this as he threw full support on the government’s move to impose stricter controls on the entry of foreign workers, notably of young Chinese nationals, working in the online gaming.
“Filipinos must always be given priority for any kind of work within the country,” said Yulo.
He further stated, “if no Filipinos are available for certain jobs, their foreign consultants/workers can be contracted on the condition that Filipino workers must work alongside foreign experts to apprentice and integrate new skills or technology.”
CCPI chamber corporate secretary Atty. Ceferino Benedicto Jr. cited President Duterte saying, “In spite of President
Duterte’s declaration of friendship between the two countries he properly imposed a crackdown on mainland Chinese workers and imposed taxes on them.”
More than half of the 45,000 work permits issued by the Labor Department in 2017 were given to Chinese nationals, according to the agency.
The Bureau of Immigration started issuing visas upon arrival to Chinese nationals in 2017. Already, more than three million Chinese have arrived in the country over the past three years, according to the Bureau of Immigration.
An estimated 100,000 to 130,000 are working in online gaming operations, but thousands are believed to be illegally working in this sector.
Foreign Secretary Teodoro Locsin Jr. has also called for an end to the visa-upon-arrival privilege for foreigners amid the influx of Chinese nationals, including undocumented ones, who may pose a security threat.
Locsin’s statement came after National Security Adviser Hermogenes Esperon raised concern over the influx of Chinese nationals in the country, saying it is a security threat, especially that several of them are reported to be undocumented.
Senators have also voiced their agreement to Locsin’s plan to stop the release of visas to foreigners upon arrival in the country amid concerns on the influx of Chinese nationals.
There are also concerns that the foreigners, especially the Chinese, are taking jobs that Filipinos can handle.
Malacanang has supported Locsin’s proposal.
TIN issuance to POGO workers
Finance Secretary Carlos G. Dominguez III has no plan to temporarily stop the issuance of tax identification numbers (TINs) to foreign nationals working in POGOs despite the concerns raised by the Chinese embassy about the work conditions of their citizens in online casinos.
“We will not suspend the issuance of TINs to foreign workers,” Dominguez told reporters when asked if he would order the Bureau of Internal Revenue (BIR) to halt the release of the tax numbers prerequisite for local employment.
“As for the BIR, we are simply implementing the Tax Code, and requiring those earning Philippine sourced income to pay income tax,” he added.
Dominguez assured that they will look into the concerns raised by the Chinese embassy in Manila and study what appropriate actions the government may take to address issues involving POGO workers.
Data from the BIR showed the agency has collected an initial P186 million in withholding taxes from POGO workers, who are mostly Chinese, and is getting another P170 million this month in tax payments from these offshore gaming operators.
Finance Assistant Secretary Dakila Napao said that of the 48 notices sent out by the BIR to POGOs directing them to pay the withholding taxes of their foreign workers, 22 have either replied or protested the tax assessments.
“The BIR, though, has already collected P186 million from the notices sent out and is set to collect another P170 million moving forward. This started last month and will be collected on August 10,” Napao said.
In a separate report to the President and the Cabinet, BIR Commissioner Caesar R. Dulay said that for the initial year of operations of POGO service providers in 2017, the BIR collected only P175 million in taxes.
POGO service providers remitted over P579 million in taxes in 2018 and voluntarily paid P789 million in the first half of 2019, Dulay said in his report during a recent Cabinet meeting.
As part of the steps to ensure that POGOs pay the right amount of taxes to the government, a Joint Memorandum Circular was issued requiring all foreign nationals and their employers or withholding agents to secure a TIN as part of the documentary requirements in securing employment permits and visas.
The BIR is now working with the Department of Labor and Employment (DOLE) in developing an interagency database of foreign nationals working in the country to effectively monitor them and ensure that they pay the correct amount of taxes to the government.