Philippine online gambling faces risk from new tax push: Expert
The Philippine government is eyeing new taxes on the online gaming industry before the end of 2025 as part of its fiscal consolidation plan. Finance Secretary Ralph Recto confirmed that the Department of Finance (DOF) has begun discussions with the Philippine Amusement and Gaming Corporation (PAGCOR) to explore the potential revenues from taxing online games, which now outpace brick-and-mortar casinos in gross gaming revenue (GGR).
But Marie Antonette Quiogue, founder of regulatory advisory firm Arden Consult, warned that further taxation on licensed online gaming operators could backfire—undermining legal revenues, boosting illegal gambling, and endangering the emerging ecosystem that supports the industry.
Legal operators already face high tax burdens
“The reality is that licensed online gaming companies already pay some of the highest taxes in the world,” Quiogue said. “Rather than impose another layer of taxation, which could damage the legal industry and strengthen illegal operators, we should begin with a clear understanding of the laws already in place — a core tenet of smart regulation.”
Quiogue explained that PAGCOR-licensed online gaming operators—referred to as “Licensed Operators”—are currently subject to a layered tax and fee structure.
“Under PAGCOR’s current regime, operators pay a licence fee averaging 30 percent of gross gaming revenue (GGR) by 2025—reduced from historical peaks of up to 47.5 percent—plus an additional 10 percent audit fee on the PAGCOR share (approximately another 3 percent of GGR),” she noted.
In addition, operators remit a 5 percent franchise tax on GGR to the national government instead of other taxes on gaming income. “Altogether, roughly 35–38 percent of each operator’s GGR is collected by the government even before any operating costs or profit are accounted for,” Quiogue said.
She stressed that this differs starkly from traditional businesses, which are taxed on their net income.
“Licensed Operators are taxed on gross gaming revenue—that is, on their total earnings before deducting any operating expenses. This structure is significantly more burdensome than the typical corporate income tax system,” she added. “Meaning, even if a Licensed Operator incurs losses or earns minimal profit in a given period, it must still remit the PAGCOR licence fee and franchise tax on GGR, as well as the applicable audit fee.”
Illegal platforms operate tax-free
Adding new levies to an already burdened legal sector while allowing illegal gambling platforms to operate unchallenged sends the wrong signal, Quiogue warned.
“What makes this burden even more striking is that Licensed Operators are competing in a market where illegal online gaming companies—many of which operate openly and at scale—pay zero taxes to the Philippine government,” she said. “These illegal platforms contribute nothing: not a centavo in revenue-based taxes, not a peso in corporate income tax, and not a single remittance to local governments, the BIR, or social benefit agencies.”
“To impose additional taxes on Licensed Operators while allowing illegal platforms to thrive tax-free is not only economically irrational; it undermines the very goals of regulation, fairness, and public revenue generation.”
Comparisons show Philippines at global high end
In the global context, Quiogue observed, the Philippines already levies one of the highest effective tax rates on legal online gaming.
“35 percent of GGR is a rate at the very upper end by world standards,” she said. “For example, several U.S. states have GGR tax rates in the low teens—New Jersey levies about 15–17 percent on online casino GGR. Brazil, which only recently moved to regulate sports betting, is proposing an 18 percent GGR tax. Emerging markets in South America like Colombia have likewise set modest rates (~15 percent of GGR) to attract and legitimise operators.”
“Global best practices suggest there is an optimal tax ‘zone’ for online gaming – a moderate range (often cited around 20–30 percent of GGR) that maximises government revenue while still keeping the legal market attractive to both players and operators.”
Excessive taxes can push players offshore
Quiogue warned that pushing taxes beyond the optimal threshold tends to reduce compliance and increase illegal activity.
“Pushing taxes much beyond this is widely viewed as non-optimal: past a certain point, high taxes sharply reduce operators’ incentive to stay licensed and drive players to offshore or illegal platforms where payouts are better due to zero tax,” she explained. “When the government takes too large a cut of GGR, legal providers struggle to compete with untaxed black-market operators and may either exit the market or never enter in the first place.”
She pointed to examples from other countries where high taxes led to unintended consequences.
“Overly high gambling taxes have backfired in some countries. France and Germany both implemented tax rates far above the 20–30 percent optimal range (often by taxing betting stakes or turnover rather than GGR), and this has just driven players to the illegal market as a result,” she said.
“Kenya offers a cautionary tale of over-taxation, prompting industry pushback. In 2017, Kenya abruptly raised its betting tax to 35 percent of GGR, up from a much lower rate of 7.5 percent. The result was immediate: major legal players exited the Kenyan market, most notably SportPesa, the country’s largest operator,” Quiogue explained. The Kenyan government later reversed its policy after realising the negative impact.
“By 2019–2020, Kenya’s Finance Committee observed that the high tax may end up not achieving the intended revenue, as most players will opt for international platforms if it remains in place. The government reversed course, first repealing the heavy tax and later reintroducing a far lower rate.”
PAGCOR’s reforms hanging in the balance
“Licensed Operators are still businesses. They pay rent, hire employees, invest in technology, and absorb regulatory compliance costs — all while competing in a dynamic and often borderless digital environment. If the economics no longer make commercial sense, they will not stay.”
– Marie Antonette Quiogue, Founder, Arden Consult
Quiogue credited PAGCOR, under the leadership of Chairman and CEO Alejandro Tengco, for introducing reforms that kept the industry viable, but warned that new taxes could undo these gains.
“Thanks to reforms by PAGCOR under Chairman Alejandro Tengco, the combined burden now hovers near 35 percent (including national taxes), putting the legal market at a tenuous balance point,” she said. “If new taxes or rate hikes drive the total levy to ~40 percent or more of GGR (as some proposals suggest), the Philippines would move into clearly non-optimal territory – comparable to France’s punitive regime. At those levels, margins for Licensed Operators would likely be too thin to justify staying in business.”
“Simply put, many Licensed Operators would leave, close down, or avoid the market rather than operate at a loss,” she said. “The gambling activity itself would not disappear – instead, players would migrate to illegal outlets (or offshore sites) that can offer better payouts because they pay no tax.”
“In effect, an over-taxation strategy would undermine its own purpose: the government could end up collecting little or nothing (as play shifts to untaxed platforms), while illegal gambling flourishes unchecked.”
A growing ecosystem at stake
Quiogue also highlighted the broader ecosystem of businesses that rely on a healthy online gaming sector.
“Licensed Operators are still businesses. They pay rent, hire employees, invest in technology, and absorb regulatory compliance costs — all while competing in a dynamic and often borderless digital environment. If the economics no longer make commercial sense, they will not stay,” she said.
“It’s not just the Licensed Operators themselves who gain from a well-regulated online gaming industry. Behind every Licensed Operator is a wider ecosystem of supporting businesses and stakeholders that enable the sector to function — and in turn, rely on it for growth.”
“These allied industries may be less visible to the public, but they are critical to the sector’s success: game content providers, marketing agencies, affiliate networks, BPOs, infrastructure suppliers, and compliance service providers all contribute to and benefit from a thriving legal market.”
Regulatory reforms fuel domestic economic activity
“A key goal of smart gambling regulation is to keep Licensed Operators profitable enough to remain in the regulated fold — so they continue contributing tax revenue, generating employment, and operating under government oversight, rather than being driven into the shadows of the illegal market.”
– Marie Antonette Quiogue, Founder, Arden Consult
Under PAGCOR’s updated rules, even affiliate marketers and support services must now be based in the Philippines.
“The rules now require all gaming affiliates and support service providers… to be accredited and formally domiciled in the Philippines,” Quiogue said. “This means they must establish a legal presence, hire locally, and comply with Philippine tax, labour, and corporate laws.”
“In doing so, PAGCOR has anchored a whole supply chain within the national economy — generating new jobs, corporate income tax contributions, BIR registrations, and increased local business activity.”
“It is a strategic policy move that turns gaming regulation into a broader platform for economic development and investment.”
Don’t jeopardise a young industry
Despite the momentum, Quiogue cautioned that the sector remains fragile. “This ecosystem is still young… What it cannot survive is the weight of excessive taxation or policy overreach,” she warned. “Burdening operators beyond commercial viability will not only drive them away but also collapse the ecosystem now required to support them.”
As lawmakers debate potential tax policies, President Ferdinand Marcos Jr. has indicated that he would not oppose new taxes on online gaming, provided they are well-studied. However, industry leaders like Quiogue argue that evidence from around the world already shows what works and what fails.
“A key goal of smart gambling regulation is to keep Licensed Operators profitable enough to remain in the regulated fold — so they continue contributing tax revenue, generating employment, and operating under government oversight, rather than being driven into the shadows of the illegal market,” she said.
