Europe-PH News

Congress aims to pass a measure that will lift taxes imposed on foreign carriers by the first half of next year, ranking officials of the two chambers said.

Following Air France-KLM's recent decision to phase out its direct flights from Manila to Europe, both the Senate and House of Representatives are now finding ways to expedite the passage of bills seeking to lift 3% common carriers tax (GPBT) slapped on foreign airlines and shippers.

"We aim to pass the bill by the second quarter of 2012," Senator Ralph G. Recto, ways and means committee chairman, told BusinessWorld in a chance interview last week.

Senate Bill 3065, which was filed by Mr. Recto last month, aims to relieve foreign carriers of the total 5.5% tax if their country of origin does not levy similar taxes to Philippine-owned carriers.

A counterpart bill (House Bill 3928), filed by Rep. Hermilando I. Mandanas (2nd district, Batangas), was approved by the committee on ways and means last February and has been pending second reading approval by the House plenary.

"Definitely there is a need to hasten the passage of the bills," Mr. Recto said.

|We will meet with counterparts in the House... to consolidate the bill," he said, nothing that the upper chamber "is looking at adopting the House's version."

Under the Consitution, tax measures originate from the House.

For his part, House Speaker Feliciano R. Belmonte, Jr. (4th district, Quezon City) said his chamber is fast-tracking the approval of the measure.

"We will try to have it approved on second and third reading before yearend," he said in a telephone interview on Friday.

"We might lose direct flights to Europe and it will be bad for us," he added.

Last month, BusinessWorld reported that Air France-KLM will stop its Manila-Amsterdam flights by April next year due to the CCT and GPBT levied on their operations.

The airline's Manila-Amsterdam flight is the last direct link of the Philippines to Europe.

The foreign chambers welcomed the development stressing that the CCT and GPBT were "discriminatory."

"We would like to see faster process, but Congress has its priorities.  We want to see the bill passed ASAP," said Robert M. Sears, American Chamber of Commerce of the Philippines, Inc. director for External Affairs, in a separate telephone interview on Friday.

"The fact is there are carriers that are leaving the Philippines because it's not a fair game," he added.

European Chamber of Commerce of the Philippines, Inc. Executive Vice-President Henry J. Schumacher concurred, saying in a text message: "In our dicussions with the ways and means committee chairmen, we found sympathy and willingness to create change.  It is trusted that acceptable legislation can be finished early next year.  These taxes are certainly not fair and are driving international airlines away.  A country that wishes tourism to grow undermines the connectivity of the country."

The Department of Finance, however, has stood pat in opposing the granting of tax exemptions to foreign airlines, saying international and domestic carriers are similarly treated since they are both subject to taxes.

While the government imposes a total of 5.5% taxes on foreign carriers , their domestic counterparts are subject to a 12% value-added taax, and a 30% corporate income tax.

Mr. Recto, however, said the enactment of the measure is important as "our tax policies make our country an unappealing market for international carriers who are critical players in trade and tourism.:

Source: Business World; The Economy; 05 December 2011