THE ISSUE of taxes levied on foreign carriers could lead to the Philippine aviation industry being left behind by other countries, the International Air Transport Association (IATA) yesterday warned.
“The Philippine authorities should recognize aviation is a key enabler of travel and tourism, and contributes substantially to the Philippine economy and employment,” IATA said in a fact sheet entitled “Cost Challenges Hurting Philippines Aviation.”
“The government should institute policies that support aviation by reducing the burden of taxes and charges imposed by various government agencies,” it added.
Foreign airlines are slapped with a 3% common carriers tax and a 2.5% gross Philippine billings tax for cargo and passenger revenues originating from the country. IATA said these should be eliminated and foreign airlines subjected to the same taxes paid by local carriers.
“These changes can be achieved by changing the interpretation of the existing laws and by passing new laws. Failure to address the current myopic policies will see neighboring countries having a competitive growth advantage with negative consequences for the Philippines,” it said.
“Eliminating both will lower the total cost of international passenger travel to the Philippines by 2.5% [and] increase the number of international arrivals and departures by 1.9%,” it added.
“[This will also] translate into a potential gain of P2 billion for the wider Philippines economy from increased tourism alone. Increased trade benefits are also expected…”
Air France-KLM, the only European carrier operating in the Philippines, earlier this month said it would be phasing out direct flights between Manila and Amsterdam due to the taxes slapped on foreign airlines.
“The recent announcement by KLM to cancel direct services to Manila is an unfortunate example of the steps that foreign airlines are forced to take due to the unsustainable cost base of operating in Philippines. The end result is that the Philippine traveler will suffer as there will be no direct flight to Europe,” the airline organization said.
It noted that carriers such as US-based Delta Air Lines, Inc. and Japan Airlines Co., Ltd. had also cut capacity to the Philippines over the last decade.
“As a result of the cut in airline services, the Philippines has become less convenient to visit, whether for business or pleasure. Trade, tourism and in country employment will suffer. [This, as] aviation growth to neighboring countries has been very strong,” IATA claimed.
The organization also said the matter of airlines having to pay Bureau of Customs staff allowances was an added burden.
“The provision of customs, immigration and quarantine services is a state responsibility. If there is a need for overtime, then this cost should be borne by the state. If the bureaus have a manpower issue, then they should work at addressing it rather than to pass the problem to airlines,” it said.
The Supreme Court recently upheld Bureau of Customs issuances requiring airlines to shoulder the overtime pay, traveling, board and lodging and meal allowances of Customs employees at Manila’s Ninoy Aquino International Airport to ensure round-the-clock operations.
IATA represents some 230 airlines comprising 93% of scheduled international air traffic.
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By: K. A. Martin
Source: Business World, October 27, 2011
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