Senate OKs scrapping of taxes on carriers, shipping lines

MANILA, Philippines - After having been certified urgent by President Aquino, the Senate voted 16-0 yesterday on third and final reading Senate Bill 3343, which seeks to scrap the taxes on international carriers and shipping lines.

Sen. Franklin 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.

Drilon said the enactment of the measure will translate to lower traveling costs for overseas Filipino workers (OFWs) and lower business costs for domestic carriers with foreign operations as soon as the tax exemptions on their gross billings are reciprocated by other countries.

He added that the measure will help the tourism sector as it will boost tourist arrivals in 2013 and help increase the capacity of local and foreign carriers for tourists to 15 million seats from the current six million seats.

At present, international carriers and shipping lines are required to pay 2.5 percent Gross Philippine Billings Tax (GPBT) and three 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 international carriers as far as the transport of passengers is concerned.

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,” Drilon said.

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

During public hearings conducted by the committee then headed by Sen. Ralph Recto, Drilon said that the Philippines remains the only country that imposes such taxes on international carriers.

“The Department of Tourism estimates that the increase in tourist arrivals will generate P455 billion in 2016 and will provide six million jobs,” Drilon said, adding that the approval of the bill is expected to increase international arrivals 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 arrivals were recorded at 3.5 million, 9.18 percent higher than the 3.1 million recorded in 2011.