House of Representatives
Quezon City
Fifteenth Congress
Second Regular Session

House Bri No,_5127

Introduced by: HONORABLE AMADO S. BAGATSING

EXPLANATORY NOTE

‘Throughout history the Filipinos have cultivated their taste for
lotteries. Lotteries in the Philippines began as early as 1833 during the
time when the Spai

h government conducted lotteries through the
Empresa de Reales Loteria Espanolas de Filipinas. Later, this was further
developed by the National Charity Sweepstakes when in 1932, the first
Sweepstakes draw was held by the Government to raise finds to support

sports projects for the Filipino youth.

In March, 1935, President Manuel L. Quezon approved Act 4130
creating the Philippine Charity Sweepstakes as a way of raising funds for the
promotion of public health and general welfare and particularly for fighting
tuberculosis. On June 18, 1954, Republic Act No. 1169 entitled “An Act
Providing for Charity Sweepstakes, Horse Races and Lotteries” was passed,
which was later amended by Batas Pambansa Blg 42 and Presidential
Decree No. 1157. By virtue of this law, the Philippine Charity Sweepstakes
Office (PCSO) was designated as the principal agency for raising and
providing funds for health programs and other services and charities.

After fifty six years, it is unfortunate that the law has remained in its
current state of obsolescence. Nevertheless, despite the absence of
appropriate legislative amendments, the PCSO has managed to survive and
has even developed new forms of lotteries to keep up with the times. To
their credit, the PCSO, through its Board of Directors, reinvented themselves


to cope with the changing demands of their operations. They maintained

their present law and applied the provisions relevant to their operations.

However, this situation provided a loophole for manipulating the
funds of the PCSO. The independence of the Board resulted to a lack of
accountability and transparency in their operations. Hence, as evidenced by
the current spate of investigations involving anomalies by their officials, we
are saddened to find a weakness in their organization. It is high time to take
a second look at the law that created the PCSO. We now witness that a weak
PCSO will breed corruption in its organization and eventually rain the very
core of society that it intends to support.

‘This measure intends to put in place the proper legislation that will
strengthen the PCSO as an organization. In the process, it is hoped that
with a new law, the entire lottery gaming industry will eventually be
developed to sustain the source of funds for health and medical assistance
and other welfare programs. In the long run, this bill will prepare the
grounds to make Government as the principal regulator of the private
sector handling lottery operations. Government shall initiate moves to
encourage the private sector to participate in the industry.

As an offshoot of this move, the timeliness of this measure is worth
noting considering that with the world being globalized and with the growth
of the internet, the future of the PCSO and the lottery gaming industry need
to be determined by a stronger law which will guide them in their course
and make them compete with other countries. Facing competition in the
world scenario is going to be tough unless we act now to support the future

of the lottery gaining industry.

It is therefore urged that the passage of this measure be given utmost

GE

AMADO S. BAGATSING

priority by this Congress.

Fifth District, Manila


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
Fifteenth Congress

Second Regular Session

HOUSE BILL NO. 5127

Introduced by: HONORABLE AMADO S. BAGATSING

“AN ACT CREATING THE PHILIPPINE CHARITY SWEEPSTAKES AND
LOTTERY COMMISSION (PCSLC) REPEALING FOR THE PURPOSE
REPUBLIC ACT NO. 1169, AS AMENDED BY BATAS PAMBANSA BLG. 42
AND PRESIDENTIAL DECREE NO. 1157, OTHERWISE KNOWN AS ‘AN
ACT PROVIDING FOR CHARITY SWEEPSTAKES, HORSE RACES, AND
LOTTERIES’ AND FOR OTHER PURPOSES”

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Title .- This Act shall be known as the Philippine Charity
Sweepstakes and Lottery Commission Act of 2011.

SEC. 2. Declaration of Policy.- The State recognizes the vital role of
the gaming industry in the promotion of the economic development of the
country as wel] as the need for generating funds for health and medical
assistance needed by the people, and, conscious that the continued growth
and success of the industry is dependent upon public trust and confidence,
it shall endeavor to safeguard and protect the public from unscrupulous
and dishonest operators through strict regulation of all persons, locations,
practices and activities and, for this purpose, it shall strengthen the agency
that handles lotteries and sweepstakes by making it at par with
international standards in its functions of coordination, regulation and
supervision of all forms of lotteries, sweepstakes and similar forms of games

of chance.


SEC. 3. Objectives .- This Act shall have the following objectives:

a. To strengthen and integrate under one agency the policy making
function, coordination and authority to grant permits and/or
licenses to all private sector establishments which shall conduct
and operate any form of lottery, sweepstakes and other similar
activities;

b. To generate sources of revenues to raise funds for health programs,

medical assistance and services and charities of national character;

¢. To protect the interest of the public at all times in the proper

implementation of its rules and regulations.

SEC. 4.- Creation of the Philippine Charity Sweepstakes and Lottery
Commission.- To implement the objectives of this Act, there is hereby

created an agency of government to be known as the Philippine Charity
Sweepstakes and Lottery Commission, hereinafter referred to as the
Commission, under the Office of the President for general direction and
coordination. This Act shall replace the former Philippine Charity
Sweepstakes Office created under Republic Act No. 1169. The Commission
shall establish its principal office in Metro Manila and shall be authorized to
put up branches in the different regions of the Philippines.

SEC. 5. - Composition of the Commission.- The Commission shall be
composed of a five-member body headed by a full-time commissioner and
four full-time deputy commissioners, all to be appointed by the President of
the Philippines. The compensation and term of office of the members of the
Commission shall be determined by the President.

A member of the commission shall be at least thirty five (35) years old,
familiar with the workings of lotteries and games of chance, of proven
competence and with unquestioned honesty and integrity.

SEC. 6. - Exercise of Functions. The commissioner and deputy
commissioners thereof shall sit and act as a collegial body to exercise
2


general administrative, executive and policy-making functions. The
commission shall be vested with regulatory and quasi-judicial functions and
shall have supervision and control over the licensing, establishment,
operation and management of sweepstakes and lotteries including, but not
limited to, other forms of games of chance whether authorized under
existing laws or not. The chairperson of the commission shall be the chief
executive officer and shall be responsible for the implementation of the
policies adopted by the commission.

SEC. 7.- Compensation and other Benefits.- Subject to the approval
of the President, the commissioner and the four (4) deputy commissioners

shall receive compensation and allowances and other emoluments and
benefits authorized for the said position.

SEC. 8.- Powers an: ctions .~

1, To regulate, supervise and control all lottery activities, sweepstakes
and other related gaming activiti

8 covered by its mandate based

on strict rules and regulations and industry standards;

2. To issue licenses and permits to operate to authorized private
organizations, establishments and corporations conducting
lotteries, as well as licenses to manufacturers, sellers and
distributors of gaming paraphernalia subject to the rules and

regulations determined by the commission;

3. To collect fees and impose fines and penalties to parties under its

jurisdiction which shall accrue to the funds of the commission;

4. To engage in investments, programs, projects, and activities
involving lotteries and gaming, either by itself or in collaboration,
association or joint venture with any person, company, or entity,
whether domestic or foreign, for the purpose of providing for

continuing sources of funds for health programs, including the


expansion of existing programs, medical assistance and services,

and/or charitable grants, subject to the approval of the President;

5. To ensure that lottery operations are honestly conducted and the
public is protected from all forms of cheating and criminal
elements;

6. To authorize expenditures of the Commission and its operations in

accordance with a budget approved for the purpose;

7. To sue and be sued, enter into contracts, acquire, purchase, lease
or dispose of property of any kind or nature necessary to carry out
the purpose of this Act;

8. To hear and investigate cases arising from violations of its rules

and regulations subject to strict observance of due process;

9. To hear petitions of any interested party or upon its own discretion,
after notice of hearing, nullify, suspend or revoke any permit or
licenses issued for failure to comply with its rules and regulations,
and/or violation of any provision of laws, decrees, order and other
issuances: Provided that, the commission may, for cause, without
notice and hearing, order the temporary suspension any activity
under its jurisdiction whenever such action in the judgment of the
commission, shall be necessary for the best interest of the players
and/or the public;

10. To
deputize them in the enforcement of laws, decrees, rules and

assistance from any government agency and/or

regulations governing the conduct of sweepstakes games, lotteries

and related activities;

11. To prepare an annual report of its accomplishments and
activities to be submitted to the President and to the two Houses of

Congress.


SEC. 9. Organization of the Commission - ‘The Commission shall
determine the organizational structure of the office and its staffing pattern
including the fixing of salaries, based on the Salary Standardization Act, and
other allowances and bonuses of its officials and employees. The
Commission shall appoint an executive director who shall handle the
operations of the office. All officials and employees shall be appointed on
the basis of merit and fitness consistent with Civil service rules and
regulations.

SEC. 10. Holding of Lotteries, Sweepstakes ther form

lotteries. The Commission shall retain a special department which will be
in-charge of conducting the holding of charity lotteries, sweepstakes and
similar lottery forms in accordance with the policies set forth by the body
including the sale of tickets and the marketing of these products. The
Commission shall determine the procedure to be followed in the conduct of

these lotteries based on international industry best practices.

SEC. 11. Licensing of Lottery Operations and Suppliers of Lottery
Equipment and Supplies - | The Commission shall require all
establishments operating lotteries and suppliers of lottery equipment and

paraphernalia to be registered, licensed and regulated in accordance with
the rules and regulations set forth by the Commission. After a public
hearing, the Commission shall determine, impose and collect charges, fees,
and assessments with respect to issuance of licenses and permits. The
Commission shall monitor and supervise the draws conducted by these

establishments to protect the interest of the public.

SEC. 12. Allocation of Net Receipts - (A) For lotteries conducted by
the Commission, a franchise tax of five percent (5%), which shall be paid
immediately to the Bureau of Internal Revenue, shall be deducted from the
gross receipts derived from the sales of lottery, sweepstakes and other forms
of lotteries: Provided that, No other tax shall be imposed on the conduct of
these charity lotteries. After deducting the franchise tax as well as the cost
of printing of such tickets the net receipts shall be allocated as follows:


a. Sixty five percent (65%) shall be set aside as a prize fund for the
payment of prizes including shares of those sellers of winning
tickets: Provided that, prizes that may be paid out from the
resulting prize fund, after said five per cent has been deducted,
shall be exempted from income tax. Prizes not claimed by the
public within one year from the date of the draw shall be
considered forfeited and shall form part of the charity fund;

b. Twenty five percent (25%) shall be set aside as the charity fund
which will address the health and welfare assistance programs
offered to communities and indigents and the public in general, the
Philippine National Red Cross, charities of national character, and
other medical missions or grants based on the guidelines approved

by the Commission;

c. Ten percent (10%) shall be used for the operations of the
Commission and its other offices including its capital expenditures.

Subject to the approval of the President, the Commission may amend
the breakdown of the percentage sharing of the net receipts in accordance
with the guidelines set by the Commission.

‘The Commission may apply part of the charity fund to approved
investments of the office but in no case shall such applications to

investments exceed ten percent (10%) of the net receipts.

Fifty percent (50%) of all unused balances for the year from these
funds shall revert to the National Treasury to form part of the general fund
while the remaining fifty percent (50%) shall revert to and form part of the

charity fund of the Commission.

(B) For lottery operations of private corporations, the allocation of
receipts after deducting the franchise tax, shall be as follows:


1. Twenty Five Percent (25%) of net receipts, after deducting the 5%
franchise tax, shall be remitted to PCSO which will form part of the
charity fund;

2. Sixty Five Percent (65%) of net receipts shall be set aside as prize
fund: Provided that, prizes that may be paid out from the resulting

prize fund shall be exempted from income tax;
if

3. Ten Percent (10%) of net receipts shall used for the operations:
Provided that, any income derived from their operations shall be

exempted from all other forms of taxes.

SEC, 13. Auditing Requirement. - The entire funds of the Commission
shall be subject to complete audit by the Commission on Audit. Full
accountability and transparency shall be ensured in all cases.

SEC. 14. Submission of Annual Report .- The Commission shall be
required to submit an annual report to the President and to the two Houses
of Congress at the end of the calendar year.

SEC. 15. Congressional Oversight Committee .- To attain the

objectives of this Act a Joint Congressional Oversight Committee is hereby
created to monitor and ensure the implementation of this Act. It shall be
composed of five (5) senators and five (5) members of the House of
Representatives to be appointed by the Senate President and the Speaker of
the House respectively. The Oversight Committee members shall not be
entitled to additional compensation nor allowances except traveling and
representation expenses and other expenses necessary to achieve its
purpose. It shall exist for a period of six (6) years from the date this Act
becomes effective. However, if necessary the two Houses of Congress may

extend it until its purpose is achieved through a joint concurrent resolution.
SEC. 16. Penalties .—

‘Any person or entity who violates any of the provisions of this Act or
its implementing rules and regulations shall, upon conviction, be fined in
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an amount not less than P50,000.00 and suffer imprisonment for not less

than one (1) year and not more than three (3) years,

SEC. 17. Implementing Rules and Regulations . - The Commission
shall prepare, its rulés and regulations necessary to implement the

provisions of this measure, within ninety days after the effectivity of this
Act.

SEC. 18. Transitory Provisions . -

1. All qualified officials and employees of the Philippine Charity
Sweepstakes Office (PCSO) shall be absorbed by the Commission
and_ selected on the basis of merit and fitness: Provided That, all
personnel who shall be separated because of this Act shall be given
separation and retirement benefits and all other benefits that they
may be entitled to under existing laws;

2. All existing records, equipment, assets, buildings, rights, interest
and other properties, whether movable or immovable, belonging to
the PCSO shall be transferred to the Commission;

3. All existing liabilities, debts and obligations of the PCSO shall be

assumed by the Commission;

4. All existing laws deriving mandatory contributions from the former
PCSO shall remain to be covered by the PCSLC under this Act;

5. The members of the existing PCSO Board shall be on holdover
status until the members of the new Commission shall have been
appointed.

SEC. 19. Separability Clause . - If any part or provision of this Act
shall be declared unconstitutional or invalid, the other parts or provisions

hereof which are not affected shall continue in full force and effect.

SEC. 20. Repealing Clause . - Republic Act No. 1169, as amended by
Batas Pambansa Bilang 42 and Presidential Decree No. 1157, is hereby
8


repealed. All laws, decrees, executive orders, rules and regulations or parts
thereof inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.

SEC. 21. Effectivity. - This Act shall take effect thirty (30) days after
its publication in the Official Gazette.

Approved,