President Benigno Aquino III recently signed into law R.A. 10376, which exempts foreign airline and shipping companies from paying 3% Common Carrier Tax (CCT) on receipts and income derived from transporting passengers and 2.5% Gross Philippine Billing Tax (GBT) imposed on foreign carriers.
Foreign carriers have long been urging for the government to remove CCT due to its burden, resulting to their cut back on operations in the Philippines.
“Once it takes effect, this law will also exempt from paying tax on the gross revenue derived from the carriage of passengers, cargo or mail, provided that the same exemption is granted by the carrier’s home country to the Philippines,” according to the President.
The President admits that the move will initially cause loss in revenue for the country, but he is positive that the move is a great way of improving the connectivity and reviving the interest of other countries to the Philippines.
The Philippine Travel Agency Association (PTAA) is expecting that international carriers such as Cathay Pacific, Delta Airlines, Etihad, KLM, Kuwait Airlines, Lufthansa/ Swiss Airlines, Qatar Airlines, and Singapore Airlines will add more flights by mid -2013, which will greatly help in tourism earnings, thus replacing the revenues lost from removing CCT and GBT.
“The travel industry has long waited for the scrapping of the CCT and GPBT. We, at the PTAA, are very grateful to the committee leaders in both Houses of Congress; Congressmen Isidro Ungab and Jerry Treñas along with Senators Franklin Drilon and Ralph Recto for the work they have done,” said PTAA President John Paul Cabalza.
Congressman Jerry Treñas said that it will eventually as well increase tourism and add direct international flights in Iloilo.
“Iloilo is a fast growing market, eventually, and like Cebu, the city will also have more direct flights from other countries”, Treñas said.
Treñas also added that by removing the taxes, there will be more European direct flights in the country, which will result to increase tourist arrival. It was cited that the main reason Air France-KLM cancelled the last direct flight from Manila-to-Europe was the high costs.
Aquino is positive that Philippines will surpass its target of 10 million foreign arrivals by 2016 through developments in the aviation industry and tourism infrastructure.
Philippines was cited by World Economic Forum as the “rising star” in terms of tourism this 2013.