MARCH 26, 2012 DATE

NR # 2690
REF. NO.

House approves tax exemptions for international air carriers

The House of Representatives has approved on second reading a bill exempting international air carriers from the Common Carriers Tax (CCT) and Gross Philippine Billings Tax (GPBT), which would boost tourism in the Philippines and enable the country to abide by its commitments to international tax treaties. The removal of the CCT, which is three percent of the airlines gross turnover, and GPBT, which is two percent of the gross turnover, is embodied in House Bill 6022 that substitutes HB 4444 filed by Rep. Jerry Treas (Lone District, Iloilo City), HB 3928 by Rep. Hermilando Mandanas (2nd District, Batangas) and House Resolution 1949 by Rep. Giorgidi Aggabao (4th District, Isabela). Prior to the plenary approval, the House Committee on Ways and Means chaired by Rep. Isidro Ungab (3rd District, Davao City) approved the measure in a recent hearing participated in by representatives of the tourism and travel sectors who supported the passage of the bill. Tourism Undersecretary Daniel Corpuz said the tax exemption will enhance the tourism policy of the government and support the tourism industry in the Philippines which has a projected target of 4.2 million tourists for 2012. The DOT extends its support for the enactment of the bill for so long as it provides redress to the current problems being faced by foreign carriers which are integral parts of the tourism sector, said Corpuz. Corpus said the administration has identified various government policy changes and plans in support of the tourism sector to generate investments, foreign exchange receipts and employment. However, Corpuz said the current tax regime hampers the countrys international air transport connectivity which is the most critical infrastructure linking the Philippines to the gross tourism market. Bear in mind that 98 percent of our foreign visitors are flown to the archipelago. It is our wish that the immediate passage of this legislation will help enhance the competitiveness of our countrys aviation policy. And it is essential to support the tourism industry, Corpuz said. Asked by Ungab if the enactment of the measure will accelerate tourism arrivals in the country, Corpuz said it will definitely boost tourism arrivals in the country.

MARCH 26, 2012 DATE

NR # 2690
REF. NO.

The projected target for this year in terms of foreign arrivals is 4.2 million which is the conservative target. The optimistic one is 4.5 million which will require additional air services and air seats in order to help us achieve our projection, said Corpuz. Marciano Ragaza, a trustee of the Philippine Travel Agencies Association, said the entry of foreign airlines to the country in light of the removal of onerous taxes will generate more economic activity not only in terms of tourism but by trade and industry like export, among others. It will boost both inbound and outbound travel which is again in terms of reciprocity, and will generate a lot of income which will also give more income taxes to the government because there will be more people employed in the airports, hotels and other tourism-related industries from our sector, not to mention the trade and industry. So we fully support the removal of the CCT and GPB in this light, said Ragaza. Steven Crowdey, vice chairman of the Board of Airline Representatives (BAR), said the passage of the proposal will definitely improve their connectivity to the Philippines and promote trade and tourism. Crowdey said in a hearing conducted by the Senate on a similar proposal embodied in Senate Bill 3065, it was very clear to them that there was general agreement between the Senate Committee on Ways and Means, the DOT and DOF that the CCT should be removed while there was debate on the GPB. We provided a draft amendment that the GPB could be subject to reciprocity. This could be done through exchange of diplomatic notes, Crowdey said. House Bill 6022 titled Rationalizing the Taxes on International Air Carriers operating in the Philippines seeks to amend Sections 28 (A) (3) (a) , 108 (B) (6) and 118 of the National Internal Revenue Code of 1997, as amended. It provides exemption from the payment of two and a half percent tax on GPB imposed on international carriers operating in the Philippines whose respective countries of domicile/registry have exchanged diplomatic notes with the Philippines for purposes of availing the exemptions pursuant to the principle of reciprocity by amending Section 28 of the NIRC of 1997. Likewise, it exempts international air carriers from the three percent CCT by amending Section 118 of NIRC and classifying transactions of the international carriers as subject to zero percent value added tax rate by amending Section 108 of the NIRC. (30)
rbb