Press Release
December 18, 2012

Senate urged to scrap tax on international carriers

Senator Franklin M. Drilon today sought the approval of a proposed measure removing the taxes on international carriers and shippers, a move that will help achieve government's target of 10 million tourist arrivals by 2016.

In his sponsorship speech delivered today, Drilon, acting chairman of Senate Ways and Means Committee, said the approval of Senate Bill 3343 will establish the country as a tourism hub and elevate its status as a viable gateway to Asian neighbors.

"I stand before you today to present a measure that will help usher in the great promises of the highly-touted tourism sector of our country. More work has to be put in place to achieve a sustainable growth in the tourism sector," stressed Drilon.

He said that in order to boost tourist arrivals in 2016, the government should move to increase the capacity of local and foreign carriers for tourists to 15 million seats from current six million seats.

However, Drilon said airline companies seemed reluctant to increase their seating capacity because of the alleged "inequitable airline tax regime" in the country.

At present, international carriers and shippers are required to pay 2.5 percent Gross Philippine Billings Tax (GPBT) and 3 percent common carriers' tax (CCT).

It was revealed in a public hearing conducted by the Committee then headed by Senator Ralph Recto that the Philippines remains the only country that imposes such taxes on international carriers, noted Drilon.

"There is an urgent need to address this very serious matter to avert undue escalation. We should dissuade the few remaining foreign carriers operating locally from transferring to other countries," stressed Drilon.

In a move to resolve this, the Committee proposes a reciprocity clause in which GPBT will only be waived when foreign carriers whose home countries likewise give a similar tax exemption to Philippine carriers.

For the CCT or the percentage tax, the Committee proposes to exempt from the payment international carriers insofar as the transport of passengers is concerned. Likewise, the bill also included the transport of passengers by international carriers in the list of transactions that are exempt from the payment of the value-added tax. "The removal of these airline taxes will improve the present situation where our tax policies seem to directly contravene our tourism goals," said Drilon.

Even though the bill will forego revenues of up to P2.5 billion (P919 million from GPBT and P1.602 billion from CCT), Drilon emphasized that such foregone revenues can be easily recouped, if not surpassed, amidst projected increases in tourist arrivals due to lower and more affordable airline fares and the expected surge in the airline industry.

"The Department of Tourism estimates that the increase in tourist arrivals will generate P455 billion in 2016 and will provide six million jobs," said Drilon, noting that, with the approval of the bill, international arrival is expected to increase to 5.55 million in 2013, 6.75 million in 2014, 8.126 million in 2015 and 10 million in 2016. For the first 10 months of 2012, tourist arrival is recorded at 3.5 million, 9.18 percent higher than the 3.1 million recorded in 2011.

Lastly, the enactment of this measure will translate to lower traveling costs for overseas Filipino workers who will be enjoying lower fares to the country. Likewise, it will lower business costs for domestic carriers with foreign operations as soon as the tax exemptions on their gross billings are reciprocated by other countries, ended Drilon.

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