Airlines buck ‘onerous’ taxes
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Airlines buck ‘onerous’ taxes

Manila : Philippines | Jan 12, 2011 at 7:12 AM PST
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The European Chamber of Commerce of the Philippines (ECCP) is pushing the government to let go of the estimated $70 million in revenues it is getting from the “unfriendly and onerous” tax regime on foreign carriers, and to look at the benefits that a more liberal policy on international airlines can bring to the economy.

“The tradeoff between loss in tax revenue and competitiveness of the air-transport sector should be viewed as an investment of the government on the economy and its various sectors,” said Henry Schumacher, ECCP executive vice president.

While the government earns P3.2 billion (approximately $70 million) on the common carriers tax (CCT) of 3% gross receipts and gross Philippine billings (GPB) tax of 2.5%, Schumacher said these levies are also causing the erosion of foreign, and perhaps Philippine, carrier flights that support Philippine trade and economic growth.

Schumacher cited a study of the International Air Transport Association (Iata), an international trade body representing 230 airlines, showing the positive effect of eliminating the GPB and CCT, such as:

  • lower total cost of international passenger travel in the Philippine market by 2%
  • increase in the number of international arrivals and departures by 230,000 passengers representing growth of 1.9%
  • increase in the number of international visitors by 70,000
  • potential gains of between $38 billion and $78 million for the wider Philippine economy from increased tourism activity

The increase in tourism arrivals will, in turn, create an additional 70,000 jobs, $214 million in employee compensation, and $5.4 million in tourism tax revenues. The resulting lower cargo-transport costs will boost export earnings in the order of $1 billion.

Over the years, Schumacher noted the number of international airlines doing business in the Philippines has dwindled even while the international aviation business in the neighboring countries, the same countries with which the Philippines needs to compete for international tourists, saw significant growth. 

The list, he said, includes

  • Alitalia
  • Air France
  • British Airways
  • Egypt Air
  • Lufthansa
  • Swissair
  • United Airlines
  • Vietnam Airlines

Some foreign carriers have also significantly reduced capacity.

“It has to be understood that the international aviation industry is the most crucial partner of Philippine tourism, recognized as a primary engine of socioeconomic growth and development.  It is undisputable that the success of Philippine tourism will greatly depend on the country’s international connectivity which is, in turn, a function of the state of international aviation industry in the Philippines,” he said.

To this end, Schumacher said the ECCP welcomes the pocket “open skies” policy of the Aquino administration.

“Tourism, being recognized in Arangkada as one of the sunrise industries, has the chance to become one of the big contributors to foreign-exchange earnings and employment. However, the industry’s success will not be delivered on a silver platter. The open-skies policy which will hopefully be confirmed in an executive order soon, will not succeed if the international aviation industry will be burdened with excessive and unfair taxes.”

................ Darlene is based in Geneva, Genf, Switzerland, and is a Reporter on Allvoices.
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