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IATA Calls For Philippines To Scrap Airline Taxes

by Mary Swire, Tax-News.com, Hong Kong

28 September 2012


In addition to the resolution of aviation safety and airport infrastructure concerns, the Director General and CEO of the International Air Transport Association (IATA) Tony Tyler has confirmed that he is looking for the government to reduce the excessive tax burdens on air transport in the Philippines.

During a press briefing in Manila, he noted that aviation remains an important contributor to the Philippines’ economy. It supports PHP35.5bn (USD850m) of economic activity in the Philippines - equal to 0.4% of its gross domestic product (GDP) – and has created some 123,000 jobs. If the impact of aviation-related tourism is added, the numbers rise to PHP192.2bn, or 2.4% of GDP, and some 874,000 jobs, or 2.5% of the country’s workforce.

In addition, he pointed out that, with regard to tourism, over 98% of price sensitive foreign visitors arrive by air, and noted that the tourism industry in the Philippines is among the most dependent on air links of any country in the world.

During the media roundtable on September 27, before a meeting with President Benigno Aquino III, he argued that “air connectivity is an irreplaceable lifeline” for the Philippines, and that the country “is missing out on great economic opportunities that could be facilitated by air transport, (because it) has a bad reputation for safety, inadequate airport capacity and high taxation.”

He confirmed that he would urge the President “to keep a watchful eye over excessive tax burdens on air transport”. For example, eliminating the Common Carrier Tax (CCT) and Gross Philippine Billings (GPB) would, he said, create “win-win” opportunities by lowering the total cost of international passenger travel by 2.5%, and increasing the number of international arrivals and departures in the Philippines by 1.9%.

Foreign airlines have been lobbying for some time for the cancellation of the 3% CCT and 2.5% GPB to which they are subjected. The taxes have caused a total withdrawal of foreign airlines, one by one, from providing direct flights to Manila. Air France-KLM dropped the only remaining direct flight from Manila to Amsterdam in March this year.

Tyler concluded that removing the CCT and the GPB taxes would mean a potential gain of up to USD78m for the wider Philippine economy, and thousands of new jobs, from increased tourism, and there would also be a positive impact on cargo and exports.

He disclosed that IATA has been working closely with the Board of Airline Representatives in the Philippines on this issue, and that he was “hopeful of speedy progress” on the taxes. He was encouraged that the lower House of Congress has passed a bill to eliminate these taxes and it is now with the Senate.

TAGS: tax | business | air passenger duty (APD) | law | aviation | Philippines | travel and tourism | legislation | tax rates | legislation amendments

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