San Pedro: Change in RP Tax Regime

BUREAUCRATIC red tape, high-tax regime and high cost of fuel compelled European carriers such as Air France and recently KLM to stop their direct flights to Manila. This inadvertently affected the entry of more European visitors to the Philippines and it does not bode well with the overall development of the aviation and tourism industry.

While the Bureau of Internal Revenue allegedly earned some P1.3 billion in annual income from the imposition of the three-percent common carriers tax (CCT) and 2.5-percent gross on billings tax – these same tax scheme killed the proverbial goose that lays the golden egg. In the end, the European carriers left one by one which left the tax scheme inutile.

Early in the first quarter, KLM – the only European carrier remaining in Philippines – terminated its 60 years of direct flights to Manila because it can no longer fathom the country’s obsessive tax regime which will leave its Manila-Amsterdam route unprofitable. The KLM flight reportedly transferred to Taipei. What a loss.

Now come the big news. House Bill No. 6022 which seeks to rationalize the airline tax regime by removing the 3 percent common carriers tax and the 2.5 percent gross on billings tax had been approved on third and final reading last May 21, 2012. The Board of Airline Representatives (BAR), whose members include 30 air carriers that have international connections from the Philippines, welcomes the approval of the bill.

“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,” says BAR First Vice Chair Steven Crowdey. “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.”

Representative Jerry I. Trenas of Iloilo City sponsored the bill that seeks to rationalize the airline tax regime in view of the slow development in international air connectivity of the Philippines.

Earlier, the KLM management noted that it will reconsider whether or not it would resume direct flights from Amsterdam to the Philippines, and vice versa.

Now, President Benigno Aquino III will revive the European flights for the benefit of the aviation industry, tourism, trade and network of overseas Filipino workers.