Restructing the Taxes Or and Providing For the Distribution of Receipts in Horse Racing, and For Other Purposes

Case Overview and Summary

Summary of Executive Order No. 194

Distribution of Gross Receipts (Section 1):
- 82% shall be distributed as dividends among holders of winning tickets.
- 8.5% shall be set aside as commission for the franchise grantee conducting the horse races.
- 8.5% shall be set aside for payment of stakes or prizes to winning horses.
- 1% shall be set aside for the use of the Philippine Racing Commission, except for pari-mutuel races where 1% shall be for the Games and Amusements Board.

Stamp Tax on Horse Race Tickets (Section 2):
- A documentary stamp tax of P0.10 shall be collected on each horse race ticket.
- If the ticket cost exceeds P1.00, an additional tax of P0.10 shall be collected for every P1.00 or fractional part thereof.
- For double, forecast/quinella, and trifecta bets, the tax shall be P0.05 for every P1.00 worth of ticket.

Tax on Winnings (Section 3):
- Every person who wins in horse races shall pay a tax equivalent to 10% of their winnings or "dividends," based on the actual amount paid after deducting the cost of tickets.
- For winnings from double, forecast/quinella, and trifecta bets, the tax shall be 4%.
- For owners of winning race horses, the tax shall be 10% of the prizes.
- The tax shall be deducted from the "dividends" or "prizes" by the operator, manager, or person in charge of the horse races before paying the winners.
- The operator, manager, or person in charge shall file a return with the Commissioner of the Bureau of Internal Revenue within 20 days from the date the tax was deducted and withheld, and pay the total amount of tax deducted and withheld within the same period.

Review and Permanence of Tax Structure (Section 4):
- The Secretary of Finance shall review the tax structure after 18 months from the effectivity and implementation of this Executive Order.
- If the government revenue from horse racing is equal to or higher than the 18 months immediately preceding the effectivity of this Executive Order, the tax structure shall become permanent.
- Otherwise, the taxes imposed under the National Internal Revenue Code, as amended, and the distribution of gross receipts from the sale of betting tickets in horse races under Republic Act Nos. 6631 and 6632 shall be automatically restored.

Implementation (Section 5):
- The Secretary of Finance shall promulgate the necessary rules and regulations to implement this Executive Order.

Repealing Clause (Section 6):
- Subject to the provisions of Section 4, Sections 203 and 229 of the National Internal Revenue Code, as amended, and all laws, orders, issuances, and rules and regulations or parts thereof inconsistent with this Executive Order are hereby repealed or modified accordingly.

Effectivity (Section 7):
- This Executive Order shall take effect immediately.