THE COURT of Tax Appeals (CTA) has ordered the Philippine Amusement and Gaming Corporation (PAGCOR) to pay its basic deficiency income tax for taxable years 2005 and 2006, amounting to P375.31 million, inclusive of surcharge and penalty rates.
In a 22-page ruling dated Dec. 22, 2023, the CTA En Banc determined the amount of tax deficiency of PAGCOR following the Supreme Court’s (SC) directive to probe its income taxes (IT) for the said two-year period.
The CTA amended its previous decision, following the SC’s Nov. 22, 2017 ruling which ordered the consolidated cases between the Commissioner of Internal Revenue (CIR) and PAGCOR to be remanded to the tax court for the determination of the final amount to be paid by the government-owned corporation. The CTA ruling was penned by Associate Justice Lanee S. Cui-David.
The High Court had reasoned that PAGCOR is entitled to the tax privilege granted for income from gaming operations. However, it cited Republic Act No. 9337, which amended the National Internal Revenue Code (NIRC) of 1997, which withdrew PAGCOR’s exemption from corporate income tax on income derived from other related services.
Hence, the SC determined that PAGCOR should only pay deficiency income tax on income derived from other related services, and not from its gaming operations, for 2005 and 2006. Likewise, the High Court said that PAGCOR is liable to fringe benefit tax (FBT) as it is not covered by tax exemptions, echoing a previous ruling.
“As ruled by the Supreme Court, PAGCOR is only liable to pay the deficiency IT, including surcharges and interests, on its income derived from other related activities for taxable years 2005 and 2006, and the assessed deficiency FBT, including surcharges and interests, for the same taxable years,” read part of the CTA ruling.
The appellate court determined that the basic deficiency income tax amounted to P6.2 million and P115.24 million for taxable years 2005 and 2006 respectively. However, adding up the surcharge, deficiency, and delinquency interest acquired in succeeding years, the total amount due as of Dec. 31, 2017, reached P8.36 million for 2005 and P366.95 million for 2006, summing up to P375.31 million.
In its ruling, the CTA explained that the surcharge and interest were only computed until the end of 2017 which is prior to the amendment of the NIRC under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
The CTA said PAGCOR is required to additionally pay a 12% per annum delinquency interest on the unpaid deficiency income tax for the taxable year 2006, as required by tax laws. The court said the total outstanding amount for the said year stands at P79.39 million as of the end of 2008. — Jomel R. Paguian
