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Philippines Parliament Approves Removal Of Airline Taxes

by Mary Swire,, Hong Kong

30 May 2012

The Philippines House of Representatives has approved, at a third and final reading, a bill which seeks to “rationalize” the taxes on international air carriers, to boost tourism and enable the country to honour tax exemptions under tax treaties and other international agreements.

Airlines have, for some time, lobbied for the removal, or at least a reduction, in the 2.5% Gross Philippine Billings Tax (GPBT) and the 3% Common Carrier’s Tax (CCT) to which they are subjected. The GPBT and CCT are levied on all revenues, passengers, cargoes and excess baggage leaving the Philippines.

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, due to the high taxes it paid for loading passengers in the Philippines.

It has been calculated that the GPBT and CCT have increased air travel costs significantly for the marginally-profitable airline industry and for the highly price-sensitive leisure traveller, especially for a country where 98% of tourists arrive by air; and that the benefits of GPBT/CCT removal could be measured in thousands of new jobs, increased revenue from more foreign tourists, and lower cargo transport costs for its exports.

The approved bill provides that international air carriers doing business in the country shall not be liable to pay the GPBT, pursuant to the grant of reciprocal exemptions that shall enter into force 30 days from the exchange of diplomatic notes between the Philippines and the relevant foreign jurisdiction.

It also includes a provision that international air carriers will be exempted from CCT, and that the transport of passengers and cargo by domestic and international air or sea carriers from the Philippines to a foreign country shall be subject to zero percent value-added tax.

TAGS: tax | business | double tax agreement (DTA) | air passenger duty (APD) | law | aviation | Philippines | travel and tourism | agreements | legislation | legislation amendments

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