Finance Dept. on airlines tax: Equal gain must offset revenue loss

December 9, 2011 3:37pm

The Department of Finance has no objections to repealing the common carrier’s tax (CCT) as long as Congress can come up with a counter measure to compensate for the revenue loss.

Government stands to lose P1.6 billion a year once the tax on airlines operating in the Philippines has been scrapped, according to Finance Department estimates.

The Aquino administration’s position on the CCT issue was relayed to House committee on ways and means chair Hermilando Mandanas and Senate committee on ways and means chair Ralph Recto.

“We subscribe to the position that any revenue loss measure enacted in Congress should at least be compensated by a corresponding revenue gain,” said Finance Secretary Cesar Purisima.

Legislators want to remove the 5.5 percent CCT and the 2.5 percent gross Philippine billings tax (GPBT) on international airlines.

Section 118 of the National Internal Revenue Code of 1997 allows government to impose the CCT — equivalent to 3 percent of airlines and shippers quarterly gross receipts — and the GPBT on their airlines flying to the Philippines.

A World Bank report in June called for the CCT’s repeal, in line with international practice that encourages growth in tourism.

Government’s position is consistent with the World Bank stand on the matter, Purisima noted.

“We acknowledge the role of tourism in generating investments, employment and reducing poverty in the country,” he said.

But when it comes to the GPBT, the Aquino administration maintains that it should not be dropped. There is no compelling reason to drop the GPBT, which is also implemented in other countries, said Purisima.

“We do not support its elimination…Freeing international airlines from income taxes is not in accordance with the basic principle of reciprocity which governs international taxation,” the Finance secretary noted.

Air France-KLM earlier said it plans to cancel its Amsterdam-Manila- Amsterdam route early next year because of the CCT.

The route is the only remaining direct flight serving Manila and Europe. — VS, GMA News


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