CEZA: We earn from ‘hosting’ fee, not from offshore betting

With the issuance of an executive order by Pres. Rodrigo Duterte on online gambling, the Cagayan Economic Zone Authority (CEZA) has pointed out that it earns income from hosting fees from its license holders and not from bets placed from abroad.

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CEZA made the clarification in a letter sent to online site Politics.com.ph in a reaction to a story which quoted Duterte saying that the government is losing around P6 billion in taxes because foreign bettors are not paying taxes.

As a result, Duterte issued Executive Order No. 13 last Feb. 2, 2017 which contained a provision that online gambling activities conducted beyond the territorial jurisdiction of Ceza is considered as illegal gambling.

In the Philippines, legalized gambling is solely operated by Pagcor through its casinos and online outlets such as e-Bingo. Also allowed to operate online gambling in their respective jurisdictions are CEZA, APECO (Aurora Pacific Economic Zone and Freeport Authority), and AFAB (Authority of the Freeport Area of Bataan).

Observers noted that the release of the EO will effectively pose a problem for CEZA since it derives its main revenues from foreign license holders who offer their gambling services outside the economic zone in Sta. Ana, Cagayan.

But CEZA, in its letter, emphasized that there are no actual bets or gaming transactions that enter the Philippines through gaming locators.

“Rather, CEZA charges 2% hosting fee based on gross wins from foreign companies that tap the gaming support services of our local locators. There are no wagers entering into or payouts coming out of the Philippines, since CEZA is purely an online gaming regulator and not an operator and regulator like Pagcor,” it said.

The 2% hosting fee on foreign companies, according to Ceza, is totally different from the kind of income generated by a gaming operator like Pagcor which accepts bets and makes payouts in gambling transactions.

It noted that under Pagcor’s current online gaming setup, it fees are “considerably higher as compared to the industry standard and are the reason why some locators have chosen to leave and register under other online gaming jurisdictions.”

“At present, there are about 500 illegal online gaming operators in the country. If Pagcor will regulate the online gaming operations not covered by CEZA and the APECO, this industry will generate more revenues for the government,” it said.

“This is the purpose of the Executive Order No. 13, which is an effort of Malacañang to rationalize and regulate the online gaming industry. These government entities, including CEZA, are meant to work together, not to compete against each other, to generate billions of revenues from the online gaming industry,” it added.

CEZA said it is opening its books of account and remittances for scrutiny and to encourage operators and other gaming authorities to do the same.

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