THE HOUSE leadership is moving to fast-track the approval of bill that will lift the alleged discriminatory taxes levied by the Philippines on international carriers even as the Finance department claims the current system is legitimate and preferential.
Recognizing that Air France-KLM’s recent decision to phase-out its direct flights from Manila to Europe will affect tourism arrivals, House Speaker Feliciano R. Belmonte, Jr. (4th district, Quezon City) said the House of Representatives will pass a measure effectively lifting the 5.5% taxes over gross receipts slapped on foreign airlines.
“I am in favor of it. HOR (House of Representatives) will pass it… early next year or sooner,” Mr. Belmonte said in a text message to BusinessWorld.
At the Senate, ways and means committee chairman Senator Ralph G. Recto also expressed support to the measure, saying his panel will await the approval of the House’s version.
“Yes [the committee will consider tax exemptions on foreign airlines]. I did file a [counterpart] bill. We must promote tourism,” he said in a separate text message.
House Bill 3928, filed by Batangas Rep. Hermilando I. Mandanas (2nd district), was approved by the committee on ways and means last February and has since been pending second reading approval by the House plenary.
The measure seeks to “recognize the tax exemptions under tax treaties and international agreements related to international carriers to which the Philippines is a signatory.”
Mr. Mandanas said that pursuant to the principle of reciprocity, the 3% common carriers tax (CCT), and 2.5% gross Philippine billing tax (GPBT) slapped on foreign airlines will be “lifted,” but only if the other country is not imposing the same tax on Philippine airline.
He added that during the committee hearings, it was revealed that the Philippines is the only country that charges airlines these taxes.
“The GPBT and CCT are perceived to be in contravention of the International Civil Aviation Organization (ICAO) resolution, to which the Philippines is a signatory, on the waiver of taxation on international air transportation,” he said in his bill’s explanatory note.
“Another aspect is that Philippines carriers are not paying percentage tax on international operations while international carriers are subject to percentage tax on their operations, thus, the discrimination,” Mr. Mandanas added in a separate interview.
While the government imposes a total of 5.5% taxes on foreign airlines, their domestic counterparts are subject to a 12% value-added tax, and a 30% corporate income tax.
The Department of Finance said it will oppose the granting of tax exemptions to foreign airlines, saying international and domestic carriers are similarly treated since they are both subject to taxes.
Last month, Air France-KLM announced that it will stop its Manila-Amsterdam flights by April next year due to the common carriers tax levied on their operations. The airline’s Manila-Amsterdam flight is the last direct link of the Philippines to Europe.
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By: Noemi M. Gonzales
Source: Business World, Nov. 3, 2011
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