The Philippines‘ offshore gambling industry raked in more tax revenue in 2020 than in 2019 despite the COVID-19 pandemic and China’s threats against its citizens who work in Filipino call centers. Learn how online gaming platforms can benefit both the platform owners and the countries they reside in.
On January 27, 2021, the Republic of the Philippines’ Bureau of Internal Revenue announced that its tax revenues from online gaming platforms during 2020 totaled USD 149.3 million, 11.7 percent more than their USD 133.7 million influx in 2019, according to Casino.org’s Devin O’Connor. With 2020’s gambling tax revenue over twice that in 2018, it’s no wonder that even the island nation’s anti-gambling president, Rodrigo Duterte, grudgingly embraced the industry, with a few caveats.
Pushing Past 2020’s Challenges
The industry wasn’t without its challenges, however. Battling the COVID-19 pandemic’s effects on one hand and the Chinese government’s influence on the other, offshore gambling operators nevertheless persisted – and did so successfully.
Let’s start with China. Philippine online gaming platforms are wildly popular among Chinese citizens. China’s government pressed its Philippine counterpart to limit offshore gambling, going even so far as to threaten Chinese nationals who move to the Philippines to work in the industry.
In a compromise move, the Duterte government limited the number of online gaming operators. In 2019, they paused issuing new permits for offshore gambling. Add to that the COVID-19 pandemic, and the number of licensed offshore gaming operators dropped from 130 to 51.
Furthermore, the pandemic’s effect on the Philippines’ economy drove the Duterte government to impose an extra 5 percent tax on the offshore gaming industry, driving the total tax rate to 7 percent. In addition, foreign workers in the offshore gambling industry must pay an astronomical 25 percent income tax rate.
But How Much Tax Is Too Much for Offshore Gaming in the Long Run?
Despite the hike in tax rates and the abrupt departure of several gaming operators, the tax revenue from online gaming shot skyward. Granted, tax revenue can provide more money to strengthen a nation’s infrastructure and defense budget.
However, look at the other industries that lost money due to the offshore gambling operators’ exit, as Philippine journalist Ralf Rivas shows. They, too, pay taxes. If offshore gaming taxes had remained at the 2 percent rate, tax revenue from that industry alone would have dropped. But consider the network of businesses that supported the industry.
Hotels and apartments that house foreign workers, the offices that online gaming providers operated out of, and the food service providers that fed foreign workers all lost revenue. As Rivas points out, the stringent tax laws caused rental income from offices alone to drop by nearly USD 290 million, causing 127,000 job losses.
The domino effect that these job and income losses due to heavy taxation cause could lead to less tax revenue for the island nation in the long run. The the offshore gambling industry did generate plenty of tax revenue during the lockdown. The high taxation rate could spell trouble for the industry in the long run if the government fails to reverse it.