Cited Laws
Accordingly, RMC No. 102-2017, and consequently, RMC No. 78-2018, insofar as they imposed franchise taxes on POGOS, are invalid and unconstitutional for being issued without any statutory basis and for encroaching upon legislative power to enact tax laws. The BIR can only Impose Income Tax Upon Income Derived from the Philippines; VAT can only be Imposed for Services and Goods Consumed in the Philippines. Apart from franchise tax, RMC No. 102-2017 likewise imposed income tax, VAT, and other applicable taxes on offshore-based POGO licensees upon their income derived from non-gaming operations or other related services. "Income from Other Related Services" is defined by RMC No. 102-2017 as "income or earning realized or derived not from gaming operations but from such other necessary and related services, shows, and entertainment." [87] At this juncture, it is vital to recall that the principle of taxation is an inherent attribute of sovereignty. As stated by Justice Perlas-Bernabe, taxation emanates from necessity , [88] and is grounded on a mutually advantageous relationship between the State and those it governs ; every person surrenders a portion of their income for the running of the government, and the government in turn, provides tangible and intangible benefits to serve and protect those within its jurisdiction. [89] Similarly, Associate Justice Japar B. Dimaampao (Justice Dimaampao) cited the principle of equality in taxation , which states that the subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state . [90] Thus, it is within the context of whether or not POGOs, particularly offshore-based POGO licensees, enjoy the protection of the State that this Court must determine whether the Philippines may impose taxes upon them. To resolve this query, it is vital to understand the services performed by offshore-based POGO licensees to determine how they operate and how they derive revenues. Under the POGO Rules and Regulations, POGOs are entities which provide and participate in offshore gaming services. As stated above, offshore gaming refers to "the offering by a licensee of PAGCOR authorized online games of chance via the Internet using a network and software or program, exclusively to offshore authorized players excluding Filipinos abroad, who have registered and established an online gaming account with the licensee." [91] Offshore gaming has three components: b.l.) prize consisting of money or something else of value which can be won under the rules of the game; b.2.) a player who: b.2.a.) being located outside of the Philippines and not a Filipino citizen, enters the game remotely or takes any step in the game by means of a communication device capable of accessing an electronic communication network such as the internet. b.2.b.) gives or unde