Treñas seeks removal of onerous taxes on foreign airlines

Thursday, July 14, 2011

AN ILONGGO lawmaker is pushing for the removal of the common carriers tax (CCT) and gross Philippine billings tax (GPBT) imposed on international air carriers to boost tourism, trade, employment and economic integration.

Iloilo City Rep. Jerry Treñas, in House Bill 4444, claimed “the grossly onerous tax imposed on foreign carriers is one of the main reasons why the number of airlines operating in the country has decreased.”

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"Every missing tourist translates into lost revenues and jobs. The lack of non-stop services also negatively impacts air freight, penalizing existing and potential exporters of electronics, fashion items, seafood and vegetables. The taxes increase the air freight cost and business development costs for exporters, particularly the small and medium-sized enterprises from the countryside seeking access in new markets like Europe and the Americas,” the proposal explained. “Elimination of these taxes would result in greater receipts for the Bureau of Internal Revenue from sustained economic activity.”

The bill seeks to amend Section 28 of the National Internal Revenue Code of 1997 as amended by removing the GPBT imposition on international carriers. “Any income derived by an international air carrier from doing business in the Philippines shall be exempt from income tax.”

It also pushes for the removal of the three percent tax on the quarterly gross receipts of international air carriers doing business in the country. “The current tax system consists of the CCT, which is three percent of the gross turnover; and the GPBT, which is two-a-half percent of the gross turnover.”

"Industry margins have rarely reached this percentage. Both CCT and GPBT are levied on all revenues, passengers, cargoes and excess baggage for air transportation leaving the country irrespective of the point of the sale of the air transportation," Treñas said, stressing that "without a healthy airline industry, tourism will never flourish. All the incentives granted under the Tourism Act of 2009 to raise our capacity to generate investments, employment and reduce poverty will simply be rendered worthless.” (CGC)