Senate removes taxes on international carriers

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VOTING 16 affirmative votes, zero negative vote, the Senate on Wednesday approved on third and final reading Senate Bill 3343 which seeks to scrap the taxes on international carriers and shippers.

After having been certified urgent today by the President, the bill was voted upon on second reading and third readings during Wednesday’s session.

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.

He added it will help usher in the great promises of the highly-touted tourism sector of our country as it will boost tourist arrivals in 201 and help increase the capacity of local and foreign carriers for tourists to 15 million seats from current six million seats.

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).

However, under the bill, GPBT will be waived provided that foreign carriers’ countries of origin will agree to give a similar tax exemption to Philippine carriers.

For the CCT or the percentage tax, the bill 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 earlier.

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.

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.

“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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