The issue began in December 2021 when the MMTCI racetrack renewed its congressional franchise (RA 11505), resulting in a reduction of the documentary stamp tax (DST) on bets from 20 percent to 10 percent, as imposed by the TRAIN LAW. However, this reduction was only implemented in May of this year, more than two years later, leading to a significant accumulation of excess collections. In response, the horse owner groups MARHO, PHILTOBO, and KLUB DON JUAN wrote a letter to the Games and Amusements Board (GAB) on August 10, bringing attention to the fact that the excess DST, collected from January to December 2021, January to December 2022, and January to April 2022, amounted to a total of P400,859,477. They requested that these excess collections be safeguarded, earmarked, and returned to the racing public in the form of added carryovers.
Following a meeting with the groups, GAB Chairman Atty Richard S. Clarin formally addressed MMTCI Chair Atty. Narciso Morales on August 14, concerning the situation where an excess DST collection remains in the possession of MMTCI, without being remitted to the BIR or returned to the betting public. The letter directed MMTCI to preserve the collected amount and refrain from using or transferring it pending investigation and final accounting. In response, MMTCI chair Morales assured GAB in his August 18 letter that all amounts collected for DST were duly remitted to the BIR and that any excess is being preserved for the government. He clarified that the jurisdiction of GAB is limited to the supervision and regulation of betting in horseracing, and that issues regarding the assessment and collection of revenue charges fall under the jurisdiction of the BIR.
The accumulation of excess DST can be attributed to the former GAB leadership’s delay in recalibrating the horse race betting machines after MMTCI’s franchise renewal. The machines continued to collect the old 20 percent DST on bets for over two years until the recalibration was approved on May 9, 2022. This discrepancy in the collection led to doubts about GAB’s jurisdiction to investigate the excess taxes collected. It is evident that the collection and assessment of taxes fall within the purview of the BIR, and the horse owners’ suggestion that the excess tax be returned to the racing public through carryovers seems inappropriate.
However, there is a bigger legal question concerning the BIR’s insistence that the new MMTCI franchise’s 10 percent DST does not supersede the 20 percent DST imposed by the TRAIN Law. The BIR argues that a specific law (RA-11505) cannot override a general law (RA 10963). This legal question will likely be settled in the higher tax courts or even the Supreme Court. Regardless of the outcome, a thorough accounting of previously collected and uncollected taxes in the industry is necessary.
Until the tax issues are resolved, MMTCI and its Board of Directors are not allowed to use the excess tax money. The horse owners’ groups propose allocating these funds to revitalize the horseracing industry, but ultimately, the decision lies with the Department of Finance or the BIR. The government will determine whether the excess tax should be returned to the racing public. In the meantime, rather than focusing on the excess tax collections, the horseracing industry should unite to fight for lower DST and other taxes on every racing bet. Additionally, the industry should work together to eliminate incidents of horse race fixing and preserve the credibility and integrity of the sport.
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