House think tank: Carrier tax on intl airlines a policy choice

Tourism receipts may not be enough to offset revenue losses if Congress repeals the common carrier's tax (CCT) slapped on international carriers, a government think-tank has warned But "... the issue at hand seems to be a policy choice–that is, whether the government is willing to give up a sure revenue source by lifting the CCT and the gross Philippine Billings Tax (GPBT) on international carriers in anticipation of increase in tourism receipts," the Congressional Policy and House Budget Research Department (CPBRD) noted in its March 2012 paper on the CCT.   International airlines want the Aquino administration to repeal the 5.5 percent CCT and the gross Philippine Billings Tax (GPBT) on international carriers.   Legislators in both houses of Congress are fast tracking the passage of separate measures repealing the two taxes.   But the House think-tank said the P2.5-billion yearly revenues from CCT might not be recovered even with a boom in tourism, because of other tax incentives in the tourism industry.   "The CCT and GPBT are easy to administer and collect because they involve only a few airline companies, whereas the expected additional revenues from higher tourism activities would have to be collected from various taxpayers and through myriad of taxes (income tax, value-added tax, etc.), not to mention the tax incentives granted by the Tourism Act," the think tank said.   The Department of Finance “interposes no objection” to a repeal of the CCT as long as revenue measures are in place to offset the losses.   "We  subscribe to the position that any revenue loss measure enacted in Congress should at least be compensated by a corresponding revenue gain,” the Finance Department said in its position paper on CCT.   The National Internal Revenue Code of 1997 imposed a 3 percent CCT on the quarterly gross receipts of airlines and shippers, plus a 2.5 percent gross GPBT on their Philippine operations.   The Finance Department noted the GPBT “… is in the nature of income tax” and should not be repealed.   Keeping international airlines from paying income taxes goes against the principle of reciprocity that governs international taxation, the department added. — VS, GMA News