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Sunday, February 5, 2012

More planeloads of tourists seen with removal of CCT

By Recto Mercene and Mia Gonzalez / Reporters

DIRECT flights between Manila and Europe would immediately resume as soon as the government removes the common carriers tax (CCT). And if that happens, a flood of tourists is sure to follow and attain the government’s goal of hosting10 million tourists by 2016.

This, according to the Airline Operators Council (AOC), in response to a bill by Sen. Ralph Recto.

Recto proposed last week the passage of a measure that would scrap the CCT on international carriers to boost tourist arrivals by 70,000 and increase incoming and outgoing passenger traffic by 230,000 in the first year of implementation.

He acknowledged that scrapping of the CCT would lead to P1.875 billion in revenue losses per year, but said the expected revenues to be generated in the tourism sector would far outweigh the losses.

“If we remove it [CCT], they [tourists] will come. And it would be truly fun to come to the Philippines,” Recto, chairman of the Senate Ways and Means Committee, said.

Recto urged President Aquino to certify as urgent his bill to speed up its congressional approval.

Malacañang promptly gave its support, as long as Congress can find ways to compensate for the revenue loss.

“We support the lifting of the common carriers tax,” Secretary Ramon Carandang of the Presidential Communications Development and Strategic Planning Office (PCDSPO) said in a phone interview.

Carandang said Malacañang shared the position of the Department of Finance (DOF), which told Congress it did not object to the proposed measure, “but they are asking that Congress find a way to make up for the potential foregone revenues.”

Under the National Internal Revenue Code, international air carriers are slapped a 5.5-percent tax on revenues—3-percent CCT on their gross receipts and a 2.5-percent tax on gross Philippine Billings (GPB) on all cargo and passenger revenues originating from the Philippines. The Philippines is reportedly the only country that imposes such taxes.

There are other pending measures in Congress seeking to remove the CCT and the gross Philippine billings tax.

Air France (AF)-KLM, which has been in the Philippines for 60 years, was the last airline to cancel its direct flight last year from Manila because of the CCT.

The airlines that no longer fly to Manila include British Airways, Lufthansa (Germany), Alitalia (Italy), Swiss International Airlines, and Air France, which has code-sharing arrangement with KLM.

AF-KLM currently flies the Manila-Taipei-Manila route in order not to cut the link with Europe, according to Ma. Lourdes San Juan, its assistant station manager.

When asked whether they will resume direct flights between Amsterdam and Manila if the CCT is removed, San Juan said: “Yes, definitely. We did not ask to remove the CCT. What should be taxed is the fare actually paid for [by passengers or actual sales] and not the [higher gross] fare as reflected on the ticket.”

The airline companies have complained with the Bureau of Internal Revenue that the CCT was based on the higher fare reflected on the ticket.

Ed Monreal, AOC president, said many European airlines have ceased operating in the Philippines because of the CCT. This issue is on top of the high cost of gasoline.

“Overhead expenses are much higher in the Philippines than elsewhere, that’s why many European airlines have stopped coming here,” Monreal said.

However, he said those that have left the Philippines could be enticed to return if they found that operating costs have gone down.

The taxes, together with increasing competition from heavily subsidized Middle Eastern competitors, have forced other European airlines out of the Philippine market over the last decade.

Civil Aeronautics Board (CAB) Executive Director Carmelo Arcilla said the country need direct flights from Europe to support the tourism sector.

Arcilla said tourist arrivals from Europe have not grown significantly over the past decade, settling at around 300,000, or 10 percent of the total, at the end of 2010.

He said increased air services to Europe would help the government attain its goal of doubling tourist arrivals to 10 million by the end of President Aquino’s term in 2016.

Carandang quoted Finance Secretary Cesar Purisima as having said the government “can live with the removal of the carriers tax, but that they [DOF] would like to work with Congress to find a way that the potential impact on revenues can be mitigated.”

“There’s a whole menu of possibilities on how that can be compensated for…. Senator Recto is coming up with some proposals. There’s a revenue side; there’s an expenditure side, so there are many ways to skin the cat,” Carandang said.

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