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Tourism boost seen after signing of law scrapping foreign carriers' tax

March 8, 2013 12:19pm
Tourism in the Philippines is expected to get a big boost after President Benigno Aquino III signed a new law exempting foreign air and shipping carriers from paying the common carriers tax on passenger traffic.

John Paul Cabalza, president of Philippine Travel Agencies Association (PTAA), said the travel industry “has long waited" for the removal of the Common Carriers Tax (CCT) and Gross Philippine Billing Tax (GPBT) as it is expected to drive more foreign airlines to mount additional flights to the Philippines.

“This will definitely boost the Philippine tourism industry as unnecessary barriers to entry into the country have been removed,” Cabalza said in a statement. “We lastly congratulate and thank President Aquino for signing it into law.”

Cabalza explained that PTAA maintains the scrapping of the tax regime would greatly impact the government's target to reach 10 million tourists by 2016.

Strategic move

Aquino described the signing of the law as a "strategic move."

"This will actually mean an initial loss in revenue for us; but it is ultimately a strategic move," he said Thursday in his speech at the Philippine Meetings, Incentive Travel, Conventions, and Exhibitions Conference in Davao.

"Airlines have long asked for this measure, since it will only bring in more traffic, and facilitate connectivity among our countries," Aquino added.

Under Republic Act 10374, international air and shipping carriers are exempted from paying GPBT provided that the carrier's home country "grants income tax exemption to Philippine carriers" on the basis of reciprocity or an applicable tax treaty or international agreement.

The law also exempted international carriers from paying the 12 percent value added tax (VAT) for the transport of passengers.

Cabalza said both CCT and GPBT carries a 5.50 percent tax on airlines that translates to P2.50 billion in revenues for the government.

'Onerous' taxation

The PTAA has been actively supporting for the past two years the calls of various local and foreign associations, including the Board of Airline Representatives (BAR) to fix what it described as an onerous taxation on airlines.

The Philippines currently has six million seats available with about 369 flights weekly, the second lowest in Asia and just slightly ahead of Cambodia.

Cabalza said revenue losses from the CCT and the GPBT would be replaced by 20 million seats by 2016 and would translate to at least an eight-percent reduction in airfares. “The law aims to attract foreign carriers to operate more flights to and from the Philippines, helping boost tourist arrivals,” he said.

Aquino, for his part, said "everybody wins" with the new law.

“With this bill, everybody wins: from our aviation industries, to our tourism industries, to the millions of our peoples who will have greater freedom in planning their trips. So I would like to thank our legislators who worked on this,” he said. — with Patricia Denise Chiu/KBK, GMA News
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