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MANILA, Philippines - Foreign carriers with connections to Manila welcomed the recent approval on third and final reading of House Bill No. 6022, which seeks to remove burdensome taxes that have been hampering the airlines’ profitability in the country.
In a press statement, Board of Airline Representatives (BAR) First Vice Chairman Steven Crowdey said: “This is indeed positive and exciting news to the international airline community that has been monitoring the progress in legislation. We thank the Aquino administration for supporting the approval of the bill in the Lower House.”
Pushed primarily by Iloilo City Rep. Jerry Treñas, HB 6022 entitled “Rationalizing the Taxes on International Air Carriers operating in the Philippines” aims to amend Sections 28 (A) (3) (a) , 108 (B) (6) and 118 of the National Internal Revenue Code of 1997, as amended.
The proposed legislation would remove the three-percent common carriers tax and the 2.5 percent tax on gross Philippine billings imposed on foreign carriers, based on reciprocity.BAR has long been pushing for the elimination of these taxes which its members say is the major reason behind the slow development in international air connectivity of the Philippines.
“We support the tourism agenda of President Aquino, in order to promote inclusive growth. We hope that this bill will be certified as urgent by the Office of the President and that the legislative process will be completed under the current 15th Congress,” Crowdey added.
European airlines used to fly directly to Manila but found said taxes too burdensome. Among these carriers were Alitalia, British Airways, KLM, Lufthansa, Air France, Scandinavian Airlines, Sabena, to name a few. The merged Air France-KLM flew its last direct flight to Manila from Amsterdam last March 25, vowing never to return until said taxes are removed. It still flies to Manila via stopover in Hong Kong.
Senator Ralph G. Recto, chairman of the Senate Ways and Means Committee, filed a similar measure in November 2011. As a result of the February 2, 2012 public hearing on the proposed legislation, a substitute bill is expected to be filed when the committee receives the comments from the Department of Finance.
The DOF has said the government stands to lose about P1.6 billion in revenues from the removal of the CCT. It added, it would not object to the repeal of the law "provided that countervailing revenue sources/measures shall be identified" to recoup the losses from the removal of said taxes on foreign carriers.
"After a decade of advocating with the Philippine government, the BAR is hopeful that the change in policy direction will finally happen under the present administration. This will signal that the Philippines is truly open to global airline business and investments," the organization said.
BAR noted that although there has been a “strong demand for capacity, airlines are not very eager to invest because of the financial consequence of the taxes. Carriers with extensive global networks have either left the Philippines or shifted capacity to the benefit of neighboring countries’ tourism and trade.”
Crowdey stressed that any increase in capacity by foreign carriers will benefit the domestic and regional networks of Philippine carriers, as well as contribute to generating business opportunities for Filipinos in tourism, aviation and allied services.
The Philippines is targeting to attract 10 million tourist arrivals by 2016, or when President Benigno S. Aquino III steps down from office.
In an earlier interview with Crowdey, who is also Delta Air Lines Inc. general manager for Australia, Micronesia and Philippines, he told InterAksyon.com the immediate resolution of these tax issues will encourage long-haul carriers to fly directly to the Philippines again.
"The Philippines has got to learn how to compete in long-haul capacity; its neighbors do it extremely well. They're offering incentives, as opposed to disincentives in the form of tax. [With your] current policies, all you’re really doing is strengthening your neighboring countries' hubs. And those same neighboring countries leverage those hubs to compete for the same tourists, the same leisure, the same health and wellness, the same long-stay programs the Philippines is looking at again."
He added that the foreign carriers have also stopped paying overtime of the Customs personnel who receive passengers during the evening flights. “There is a process that has begun to cease Immigration and Quarantine overtime fees. I’m not exactly sure how long it will take, but the process has started. We just have to work our way through [it].”
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Other authors of HB 6022 are Reps. Hermilando Mandanas (2nd District, Batangas), Giorgidi Aggabao (4th District, Isabela), Isidro Ungab (3rd District, Davao City), Rufus Rodriguez (2nd District, Cagayan de Oro), Tomas Apacible (1st District, Batangas), Fernando Gonzalez (3rd District, Albay), Luis Villafuerte (3rd District, Camarines Sur), Roger Mercado (Lone District, Southern Leyte), Florencio Miraflores (Lone District, Aklan), Elmer Panotes (2nd District, Camarines Norte), Rodolfo Albano (1st District, Isabela) and Antonio Alvarez (1st District, Palawan).