P400-M excess documentary stamp tax collections in horseracing—SHARP EDGES by JAKE J. MADERAZO
The issue started In December 2021 when the MMTCI racetrack successfully renewed its congressional franchise (RA 11505) that reduced its documentary stamp tax (DST) to only 10 percent of bets from the previously imposed 20 percent under the TRAIN LAW. The reduction however was only implemented in May, this year or after more than two years, thereby creating big excess collections.
In an August 10 letter, the three biggest horse owner groups, MARHO, PHILTOBO, KLUB DON JUAN called the attention of the Games and Amusements Board (GAB) that these excess DST, collected from Jan-Dec. 2021, Jan-Dec. 2022 and Jan to April 2022 already amounted to P400,859,477. They also asked that this excess collection be safeguarded, earmarked, and returned to the racing public in the form of added carryovers.
After meeting with the groups, on August 14, GAB Chairman Atty Richard S. Clarin formally asked MMTCI Chair Atty. Narciso Morales on a “situation where an excess DST collection still remains in the possession of MMTCI that is neither remitted to the BIR nor returned to the betting public”. It further said, “Pursuant to section 8, PD 420, you are hereby directed to PRESERVE any amount collected from the betting public and refrain from drawing therefrom, earmarking, transferring or otherwise spending the same, pending investigation and final accounting period”.
MMTCI chair Morales in his August 18 letter, responded and assured GAB that “all amounts collected for DST, as computed thru a totalizator that was tested, evaluated and assessed and approved by GAB for use and implementation, were duly remitted to the BIR, and that any excess therefrom is preserved and kept intact for the government”.
Citing Section 8 of PD 1095, Morales clarified that the jurisdiction of GAB is limited to the supervision and regulation of betting in horseracing. “All issues relating to the assessment and collection of all national revenue charges are under the jurisdiction of the BIR, which finds support from Section 2, National Internal Revenue Code (NIRC) as amended by RA 10963. “. “Moreover, it is also the NIRC, as amended, otherwise known as the TRAIN LAW, that stipulates BIR’s power and duty to assess and collect appropriate DST on each jai-alai, horse race ticket, lotto or other authorized number games”. “Conclusively, it is the BIR that has the exclusive jurisdiction to investigate, account and collect DST from MMTCI.
“Clearly, MMTCI had duly complied the rules and regulations of the Philippine Racing Commission and GAB with respect to the conduct of horseracing, allocation of prizes and betting in horseracing”. It concluded, “In view of the foregoing, we respectfully submit our position that the proper government agency that may conduct an investigation and final accounting on the DST collected and remitted by our company is the BIR”.
The accumulation of excess DST could be traced to the former GAB leadership’s refusal to immediately re-calibrate the horse race betting machines upon MMTCI’s franchise renewal. In a board resolution, then chair Baham Mitra approved the reduced recalibration but endorsed it to Executive Secretary Lucas Bersamin for approval. This dilemma left the machines still collecting the old 20 percent on bets for more than two years. It was only on May 9 this year that the approval came, and GAB recalibrated the totalizator.
From the above exchanges, I seriously doubt GAB’s jurisdiction to investigate the collected excess documentary stamp taxes. It is very clear that since these are taxes, and the issues are exclusive between the BIR and its “collecting agency”, in this case MMTCI. I also find hilarious that GAB even suggested the return of this excess tax to the racing public in the form of carryovers as prodded by the horse owners. Is GAB the new BIR in this issue, investigating tax payments? It would be much better if the tri-org sought the help of the Department of Finance/BIR not GAB on this issue.
But a legal question, much bigger, has been raging despite Malacañang’s approval of GAB recalibration and the reduction. BIR insists that the new MMTCI franchise’ 10 percent DST does not supersede TRAIN Law’s 20 percent DST. The tax agency cited that a specific law (RA-11505-new MMTCI franchise approved 2021) cannot supersede a general law-(RA 10963-TRAIN LAW approved 2017). The BIR CALABARZON Regional director then ordered MMTCI to continuously remit the old 20 percent DST even under a new franchise. MMTCI complied for months but stopped remitting when they formally questioned the BIR’s opinion on this legal gray area. MMTCI posited that their new franchise being a specific law of 10 percent DST, can supersede an earlier enacted general law-TRAIN Law with 20 percent DST. This triggered a legal question and litigation that will probably reach the higher tax courts or even the Supreme Court.
In a sense, these talks of lower or high DST interpretations and specific tax over general tax, both unresolved tax issues, now imposes a huge challenge to the horseracing industry, this time from the BIR. If the Court of Tax Appeals rule that the TRAIN law cannot be superseded by the franchise laws of MMTCI and HAPI racetracks, racing bets will be back to 20 percent DST. Good, if the otherwise happens. But either way, expect a subsequent and thorough accounting of all previously collected and uncollected taxes of the industry.
Today, majority of horse owners are unaware of this. Most are focused on the excess DST collections that MMTCI says are “preserved and held intact for the government”. Technically and legally while the tax questions are being deliberated, MMTCI and its Board of Directors cannot really touch this tax money. But the big horse owners’ groups insist that the new MMTCI board thru GAB can allocate these excess DST funds, estimated to be P382M to revitalize the horseracing industry. Some suggested P1-M per racing day added carryover for a period of two years, while some say P2M every racing day, since these came from the betting public.
But to government, this is already and clearly taxpayers’ money and the discretion to spend it remains only within the ambit of the Department of Finance or the BIR. It will declare if these will be returned to the racing public. In the meantime, it is best that instead of bickering and imagining around these government excess tax collections, the horseracing industry should once and for all, unite and continue the fight for lower DST and other taxes on every racing bet. Moreover, the industry must unite to eliminate horse race fixing incidents involving unscrupulous elements in the industry, who by selfish monetary gain, continue to destroy the esteemed credibility and integrity of the sport of Kings.
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