Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Fifteenth Congress
First Regular Session

HOUSE BILLNO.__ 3398

Introduced by Honorable Arnulfo P. Fuentebella,
Honorable Mark Llandro L. Mendoza and Honorable Rex Gatchalian

EXPLANATORY NOTE

President Benigno Simeon “Noynoy” C. Aquino III has recently
indorsed the privatization of the state-owned Philippine Amusement and
Gaming Corporation (PAGCOR) which is in charge of casinos in the
country as one of the targets of his administration following the strong
and repeated calls of Catholic bishops for the government to clarify the
state’s policy towards gambling and more importantly, for the
government to end its involvement in state-sponsored gambling casinos.

The fact that the government itself serves as the chief operator of
casinos, games of chance and other betting activities while at the same
time is the one tasked to regulate these activities is, indeed, irregular and
anomalous.

This bill, therefore, proposes the privatization of PAGCOR and the
establishment of the Philippine Amusement and Gaming Commission to
maintain and strengthen the regulatory functions of the State over all
casinos, other games of chance and betting activities authorized under
existing laws.

As a rule, all forms of gambling are illegal, and Congress has been
very strict in recognizing gambling as a necessary evil.

Starting with Articles 195 to 197 of the Revised Penal Code and
the subsequent laws such as Presidential Decree (PD) No. 1602
(Prescribing Stiffer Penalties on Illegal Gambling which modified
Articles 195 to 199 of the Revised Penal Code and repealed inconsistent
provisions and prescribed stiffer penalties on illegal gambling), PD 449



(Cockfighting Law of 1974), Republic Act No. 309 (An Act to Regulate
Horse-Racing in the Philippines), Republic Act No. 1169 (An Act
Providing For Charity Sweepstakes Horse Races and Lotteries),
Commonwealth Act No. 485 (An Act to Permit Betting on the Game of
Basque Pelota), and PD 810, the policy has been to punish gambling and
in exceptional cases where it is allowed, to strictly control its franchise.

It must be noted that then President Corazon C. Aquino repealed
PD 810 with the intention not to grant any franchise for jai-alai as it was
said that the Aquino government was grounded on a strong sense of
morality and was very much against gambling.

The only form of gambling allowed by law is that stipulated under
PD 1869, which gave PAGCOR its franchise to maintain and operate
gambling casinos.

Under the leadership and administration of President Noynoy
Aquino, there is hope that the government’s role as a maintainer and
operator of casinos will finally end.

A Philippine gaming commission should therefore be established
to regulate the operation of existing and future casinos and other games of
chance authorized under existing laws, with the end in view of ensuring
that the efforts by the new government are geared towards clean and
honest governance and creation of conditions conducive to growth and
competitiveness of private businesses.

Hence, approval of this bill is urgently recommended.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

Fifteenth Congress
First Regular Session

3398

HOUSE BILL NO.

Introduced by Honorable Arnulfo P. Fuentebella,
Honorable Mark Llandro L. Mendoza and Honorable Rex Gatchalian

AN ACT
CREATING THE PHILIPPINE AMUSEMENT AND GAMING
COMMISSION, PROVIDING FUNDS THEREFOR AND FOR
OTHER PURPOSES

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

TITLE I. GENERAL PROVISIONS

SECTION 1. Declaration of Policy. — It is hereby declared to be
the policy of the State to regulate all games of chance authorized under
existing laws in order to attain the following objectives:

a) Integrate the right and authority of regulation under the
administration and supervision of the government;

b) Provide for strict regulation of all persons, locations,
practices, associations and activities related to the operation of licensed

gaming in order to maintain public confidence and trust;


c) Restore public trust in the gaming industry of our country by
institutionalizing policy reforms in the conduct of its regulation;

d) Expand existing tourist attractions through these recreation
and integrated facilities, promote employment and broaden opportunities
for job creation; and

e) Generate sources of additional revenue to fund infrastructure
and socio-civic projects of the government.

TITLE I. CREATION OF THE PHILIPPINE AMUSEMENT
AND GAMING COMMISSION

SEC. 2. Philippine Amusement and Gaming Commission. - To
implement the policy of the State and to pursue the objectives set forth in
the preceding section, there is hereby created the Philippine Amusement
and Gaming Commission, hereinafter referred to as the Commission,
which shall have its principal office in Metro Manila. The Commission
may establish such offices in the Philippines as its operations would
require and its Commissioners may determine.

The Commission shall act as an independent, quasi-judicial
regulatory body which shall exercise supervision and control over all
casinos, games of chance authorized under existing laws and other
affiliated entities. Further, it shall set and enforce the franchise granted

by Congress to private individuals or corporations to establish and


conduct casinos, other games of chance authorized under existing laws
and other affiliated entities.

SEC. 3. Appointment of the Commissioner. — The President of the
Philippines shall appoint the Commissioner who shall act as the Chief
Executive Officer of the Commission and be responsible for the proper
administration and management of the functions and affairs of the
Commission in accordance with the policy of the State.

SEC. 4. Deputy Commissioners. — There shall be ten (10) Deputy
Commissioners, five (5) of whom shall come from the government sector
and five (5) from the private sector.

The Commissioner and Deputy Commissioners shall be of
unquestioned integrity and proven competence. They shall have a term of
five (5) years, and be eligible for reappointment to another five (5) years
unless sooner removed for just cause under existing laws.

It is prohibited for the Commissioner or his Deputy Commissioners
or any of their relatives within the fourth civil degree of consanguinity or
affinity to hold any interest either as owner, investor, stockholder, officer
or director in any of the gaming establishments authorized under existing
laws and other affiliated entities or manufacturer of supplies which the

Commission regulates.


The Commissioner and Deputy Commissioners shall be provided
with a fixed salary, per diem and other emoluments as may be allowed by
accounting and auditing rules and procedures.

SEC. 5. Powers, Duties and Functions. — The Commission shall:

a) Supervise, administer and control the operation of casinos,
games of chance authorized under existing laws and other affiliated
entities;

b) Act on applications by affiliated entities, suppliers of goods
and manpower services for permits or licenses in accordance with its
rules and guidelines, and revoke, review or modify the same in
appropriate cases;

c) Establish and prescribe rules, regulations, as well as
standards related to the operation and administration of gaming, including
guidelines in the hiring of casino personnel and employees and services
of foreign technical consultants;

d) Impose reasonable fees for permits and licenses, as well as
fines and penalties for non-compliance or breach of any of the rules
which it administers as well as monitor the correct reporting of earnings

by these casinos and related entities;


e) _ Advise the President on policies relating to the supervision
and inspection of games of chance, casinos authorized under existing
laws and other affiliated entities;

f) Enter into contracts, and to sue and be sued; and

g) Employ such officers and personnel as may be necessary or
proper to carry on its purpose:

SEC. 6. Other Duties. — For the accomplishment of any of the
purposes and objectives of the Commission and in furtherance of any of
the powers abovestated, the Commission shall:

a) Supervise the operation of casinos, other games of chance
authorized under existing laws and other affiliated entities, the persons
responsible therefore and the conduct of gaming within the said casinos;

b) _ Prescribe the standards and regulations relative to the fitness
and participation of local gaming players, ensuring that only those who
can afford are given the opportunity to play and issue permits for such
purpose, if necessary;

c) Detect offenses committed within casino premises or in
relation thereto;

d) — Adopt its internal rules of procedure in the exercise of its
quasi-judicial function, to include the power to issue summons by

subpoena ad testificandum ot by subpoena duces tecum;


©) Receive and investigate complaints from casino patrons
concerning the conduct of gaming in the casino;

f)  Adjudicate cases arising from disputes between a casino
operator or his employees, and the patrons of the casino, and if the action
so warrants, suspend the operations of the franchise holder or impose
other disciplinary measures like fines and penalties;

g) Investigate and determine the sustainability of applicants for
franchises or licenses and provide Congress with recommendations
thereon;

h) Examine or review casino books and other records, on its
own or through duly authorized representatives, as may be required;

i) Inspect, test and approve gaming equipment and chips used
in casinos;

j) Prepare and submit to the President periodic reports
concerning the operation and conduct of gaming in casinos or as the
Commission may see fit, or as the President may require;

k) Provide Congress with reports on culpable violations of the
term or conditions of the franchise based on factual and investigative

examinations;


1) If public interest or public welfare so requires, recommend
to Congress that the franchise it had granted be revoked, canceled or
modified; and

m) Perform such other functions and duties as are conferred
upon the Commission as may be necessary for the effective
implementation of this Act.

SEC. 7. Responsibilities of the Commissioner and the Deputy
Commissioners. — In addition to the powers, duties and functions of the
Commission enunciated in this Act, the Commissioner and the Deputy
Commissioners shall:

a) Receive, allocate and distribute, with the approval of the
Office of the President of the Philippines, the 30% share of the
Government in the gross earnings of the games of chance, casinos
authorized under existing laws and other affiliated entities earmarked to
finance health, education, sports and for the maintenance of peace and
order;

b) Designate the Landbank of the Philippines or the
Development Bank of the Philippines as the depository bank of the
Commission or trustee of the funds thereof;

¢) Prepare and submit for approval to the Office of the

President of the Philippines at the beginning of each calendar year the


proposed budget that may be necessary to ensure the smooth operation of
the Commission;

d) Submit to the Office of the President of the Philippines
before the end of February each year a list of all the health, education and
sports projects and activities for the maintenance of peace and order that
might have been financed from the earnings of the Commission, and to
submit such periodic or other reports as may be required of it from time
to time; and

) Perform such other powers, functions and duties as may be
directed and authorized by the President of the Philippines or as may be
necessary or proper for the accomplishment of its purposes and
objectives.

SEC. 8. Government Audit. — All revenues derived by the
government from the operations of casinos and other establishments
under the regulation by the Commission in accordance with laws shall be
subject to relevant auditing and accounting guidelines of the Commission
on Audit (COA).

SEC. 9. Congressional Oversight Committee. — There is hereby
created a Joint Congressional Oversight Committee composed of five (5)

Senators and five (5) Representatives to be appointed by the Senate


President and the Speaker of the House of Representatives, respectively.
The Oversight Committee shall have the following duties and functions:

a) To set guidelines and overall framework to monitor and
ensure the proper implementation of this Act;

b) To ensure transparency, require the submission of reports
from the PAGCOR Board of Directors and subsequently from the
Commission with the Department of Finance on the conduct of the
privatization;

c) To oversee the enforcement of the specific regulatory
mandate of the Commission;

d) To determine weaknesses in the law and recommend the
necessary remedial legislation or executive measures; and

¢) To perform such other duties, functions and responsibilities
as may be necessary to attain its objectives.

The Oversight Committee shall adopt its internal rules of
procedure, conduct hearings and receive testimonies, reports and
technical advice, invite or summon by subpoena ad testificandum any
public official or private citizen to testify before it, or require any person
by subpoena duces tecum to produce documents or other materials as it

may require consistent with the provisions of this Act.


The Oversight Committee shall organize its staff and technical
panel, and appoint such personnel, whether on secondment from the
Senate and the House of Representatives or on temporary, contractual, or
on consultancy, and determine their compensation subject to applicable
civil service laws, rules and regulations with a view to ensuring a
competent and efficient secretariat.

The members of the Oversight Committee shall not receive
additional compensation, allowances or emoluments for services rendered
thereto except traveling, extraordinary, and other necessary expenses to
attain its goals and objectives.

The Oversight Committee shall exist for a period of ten (10) years
from the effectivity of this Act and may be extended by a joint concurrent
resolution.

TITLE Ul. PRIVATIZATION OF THE OPERATION
OF CASINOS UNDER THE PAGCOR

SEC. 10. PAGCOR Privatization. — The franchise previously
granted to the Philippine Amusement and Gaming Corporation
(PAGCOR) is hereby revoked: Provided, however, That it shall be
allowed to continue its operation in a hold-over capacity but under the
supervision of the Commission, for a period not to exceed five years,

Within the said period, it shall transfer the ownership and operation of its


existing casinos, games of chance, authorized under existing laws and
other affiliated entities to qualified individual or corporate investors.
Such privatization shall be made through the sale of the shares of stock of
the corporation and of the assets, properties and other equipment
appurtenant to the operation of the casinos, other games of chance
authorized under existing laws and other affiliated entities.

For purposes of this section, the President of the Philippines shall
name and create a five (5) member Board of Trustees whose primary duty
shall include, but not be limited to, the administration of the conduct of
the sale and receiving the proceeds thereon which they shall hold in trust
for developmental projects which the President of the Philippines may
later on identify.

A privatization plan shall be developed within the first year from
the effectivity of this Act, prepared by the Board of Directors of
PAGCOR in coordination with the Department of Finance and the Board
of Trustees and submitted to the President of the Philippines for approval.
The rights and obligations under any subsisting contract with PAGCOR
shall be respected and accorded the best terms possible to recover
investments.

The sale of the assets, properties and other equipment of the

PAGCOR shall be made in accordance with current auditing, inventory


and public auction guidelines and other applicable laws. The
privatization value to the government of the assets of PAGCOR shall be
optimized and the participation by Filipino citizens and corporations shall
be ensured.

TITLE IV. GRANT OF FRANCHISE

SEC. 11. Nature and Term of Franchise. ~ The power to grant
franchises to own and operate casinos, other games of chance authorized
under existing laws and other affiliated entities shall be vested
exclusively in the Congress of the Philippines. Subject to the terms and
conditions established in this Act, the franchise to own and operate, as
may be granted by Congress to games of chance and casinos shall be for a
period not to exceed twenty-five (25) years.

The franchise granted by Congress is an assigned exclusive
privilege, and as such, cannot be sold, alienated, transferred, conveyed,
nor be made subject of a lease agreement.

SEC. 12. Scope of the Franchise. — In the interest of the public
welfare, the scope of the gaming businesses throughout the country shall
be limited to a specific locality in order to prevent its proliferation to the
detriment of minors, vulnerable persons and the society at large. Thus, a

franchise to operate a new casino may only be granted to the municipality


or city where there is already an existing and operating franchise granted
by Congress.

SEC. 13. Special Condition of Franchise. — The franchise
approved by Congress shall allocate five percent (5%) of its earnings as
Franchise Tax, and thirty percent (30%) of its aggregate gross earnings
shall be immediately set aside and allocated to fund health, education,
sports and maintenance of peace and order throughout the country as may
be directed and authorized by the President of the Philippines.

The Commission shall act as the trustee of these funds, subject to
the reportorial and audit requirement by the Commission on Audit.

SEC. 14. Income and Other Taxes. — No tax of any kind or form,
income or otherwise, as well as fees, charges or levies of whatever nature,
whether national or local, shall be assessed and collected under a
franchise; nor shall any form of tax or charge attach in any way to the
earnings of the Corporation, except a Franchise Tax of five percent (5%)
of the gross revenue or earnings derived from its operation under the
franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or
assessments of any kind, nature or description, levied, established or

collected by any municipal, provincial, or national government authority.


SEC. 15. Other Fiscal Incentives. — The following incentives
shall be granted to casino operators and other gaming establishments:

a) Capital Investment and Equipment. — Subject to rules and
regulations which properly define capital investments and equipment
necessary for various kinds of gaming, franchise holders shall be entitled
to an exemption of one hundred percent (100%) of all taxes and customs
duties on importations of capital investment and equipment.

b) Goods and Services. — Subject to rules and regulations which
properly define goods and services necessary for various kinds of
gaming, registered gaming establishments shall be entitled to the
following:

1. Importation of goods actually utilized or of services
actually rendered by or through casinos and other gaming
establishments shall enjoy one hundred percent (100%) exemption
from all taxes and customs duties; and

2. A tax credit equivalent to all national internal revenue
taxes paid on all locally-sourced goods and services directly or
indirectly used by the said establishments.

c) Social Responsibility Incentive. — A gaming establishment

holding a franchise shall likewise be entitled to a tax deduction

equivalent to a reasonable percentage, not exceeding fifty percent


(50%), of the cost of environmental protection or cultural heritage
preservation activities, sustainable livelihood programs for local
communities, and other similar activities.

SEC. 16. Non-Fiscal Incentives. — The following incentives shall
also be granted to casino operators and other gaming establishments:

a) Employment of Foreign Nationals. — A casino or gaming
establishment may employ foreign nationals in executive, supervisory,
technical or advisory positions for such reasonable periods and under
such terms as may be provided by the Commission, with due regard for
the proper protection and representation of foreign investments in
registered gaming establishments, and the need to ensure easy travel into
and out of the Philippines by such nationals and their immediate families;

b) Special Investor’s Resident Visa. - Under such terms as may
be provided by the Commission, a foreign national who shall have made
an investment with a value of at least Two hundred thousand dollars
($200,000.00) in casinos or gaming establishments with a franchise shall
be entitled to a special investor's resident visa. With such visa, the
foreign national shall be entitled to reside in the Philippines while his or
her investment subsists. Subject to regulations to be issued by the Bureau

of Immigration (BI) and the Department of Labor and Employment


(DOLE), the Commission shall issue working visas renewable every two
(2) years to foreign personnel of the casinos and gaming establishments.

c) Foreign Currency Transactions. — Subject to the provisions
of Section 72 of Republic Act No. 7653, as amended, otherwise known as
the New Central Bank Act:

1. Repatriation of Investments. — In the case of foreign
investments, the right to repatriate the entire proceeds of the liquidation
of the investment in the currency in which the investment was originally
made and at the exchange rate prevailing at the time of repatriation; and

2. Remittance of Foreign Exchange. — The right to remit
earnings from a foreign investment in the currency in which the
investment was originally made and at the exchange rate prevailing at the
time of remittance.

d) — Requisition of Investment. — There shall be no requisition of
the property of casinos and other gaming establishments, except in the
event of war or national emergency, and only for the duration thereof. In
any case, the affected person shall be entitled to just compensation, and
shall have the right to repatriate such compensation as provided in
paragraph (c) above.

SEC. 17. Registration of Affiliated Entities. — All persons

primarily engaged in gambling, with existing contract or franchise ftom


the PAGCOR shall register anew with the Commission, which shall issue
the corresponding license upon compliance with the promulgated rules
and regulations relative thereto. The Commission shall maintain a
registry of its affiliated entities, and shall exercise the powers, authority
and the responsibilities vested in the Securities and Exchange
Commission over them, including but not limited to amendments of the
articles of incorporation and by-laws, changes in the corporate term,
structure, capitalization and other matters concerning the operation of the
affiliated entities, the provisions of Corporation Code of the Philippines
to the contrary notwithstanding, except only with respect to original
incorporation.
TITLE V. FINAL PROVISIONS

SEC. 18. Appropriations. — The amount of One Hundred Million
Pesos (P100,000,000.00) as well as Twenty-Five Million Pesos
(P25,000,000.00) are hereby allocated from the existing funds of
PAGCOR for the initial operation of the Commission and the
Congressional Oversight Committee, respectively. Thereafter, the
amount necessary for the continued operation of the Commission and the
Congressional Oversight Committee shall be included in the General
Appropriations Act of the year immediately following the effectivity of

this Act.


SEC. 19. Transitory Provision. — The Philippine Amusement and
Gaming Corporation shall, subject only to the hold-over capacity
provision under Section 10 of this Act, be absorbed by the Commission
and its functions including its appropriation, funds, records, equipment,
facilities, rights, other assets and personnel shall be transferred to the
Commission within 120 days after the effectivity of this Act. Its
liabilities, if any, shall be treated in accordance with the government
auditing laws and other pertinent laws, rules and regulations.

The Commission shall effect the transfer herein provided in a
manner that will ensure the least disruption of the absorbed offices. The
qualified and the necessary personnel of the absorbed office shall be
transferred to and absorbed by the Commission: Provided, That the
tenure, rank, salaries and privileges of such personnel are not reduced or
adversely affected. The personnel who shall be separated from the
service shall be granted by the Commission, separation pay and
retirement and other benefits provided under existing laws but in no case
shall the separation pay be less than one (1) month for every year of
service.

In the period prior to actual assumption of duties by the
Commission, the PAGCOR shall continue to exercise its functions and

discharge its duties and responsibilities.


SEC. 20. Implementing Rules and Regulations. — The
Department of Finance, in consultation with the proper committees of
Congress shall, within sixty (60) days after the effectivity of this Act,
formulate the necessary rules and regulations for the effective
implementation of this Act.

SEC. 21.  Separability Clause. — If for any reason, any section
or provision of this Act is declared unconstitutional or invalid, such parts
or provisions not affected by such declaration shall remain in full force
and effect.

SEC. 22. Repealing Clause. — All laws, orders, decrees, rules
and regulations and other issuances or parts thereof inconsistent with the
provisions of this Act are hereby repealed or modified accordingly.

SEC. 23.  Effectivity. — This Act shall take effect fifteen (15)
days after publication in the Official Gazette or in two (2) national
newspapers of general circulation.

Approved,