MANILA, Philippines — Less than a decade ago, European airlines such as British Airways, Scandinavian Airlines System (SAS), Lufthanza, KLM, Air France, Sabena, Alitalia, and a few more that had since gone under, used to fly out of the Ninoy Aquino International Airport (NAIA) and bring Filipinos directly to Europe, sometimes with stopover in Hong Kong, Singapore, or Bangkok.
Not a single one of them comes to the NAIA anymore.
Air France-KLM, which had been operating in the Philippines for 60 years, quit its direct flight from Manila to Amsterdam last year, although it still retains its Manila-Taipei-Manila link.
These air carriers quit Manila because of the oppressive Common Carriers Tax (CCT) imposed by the government, along with the high cost of operating in the country, among other reasons.
Under the National Internal Revenue Code, international air carriers are slapped a 5.5 percent tax on revenues — a 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.
There are pending measures in Congress seeking to remove the CCT and the Gross Philippine Billings tax.
Senator Ralph Recto, wishing to bring back European tourists to Manila, and thereby help the Tourism Department’s (DOT) strategy to increase tourists to 10 million by 2016, is proposing a bill to remove the CCT.
Recto’s proposal was greeted with enthusiasm by the airline community, promising that if the CCT is eliminated, direct flights from Europe to the Philippines would immediately resume.
The DOTC, warming to Senator Recto’s proposal, said that if the bill pushes through, a flood of tourists is sure to follow and attain the government’s goal of hosting 10 million tourists by 2016.
It added that the passage of the measure that would scrap the CCT on international carriers would boost tourist arrivals by 70,000 and increase incoming and outgoing passenger traffic by 230,000 in the first year of implementation.
Although the Senator acknowledges that scrapping of the CCT would lead to R1.875 billion in revenue losses per year, he 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 urges 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,” says Secretary Ramon Carandang of the Presidential Communications Development and Strategic Planning Office (PCDSPO).
He said Malacañang shares the position of the Department of Finance (DOF), which told Congress it did not object to the proposed measure, but had asked that Congress finds ways to make up for the potential foregone revenues.
The airline companies have complained with the Bureau of Internal Revenue that the CCT was based on the higher fare reflected on the ticket. They suggested that billings should be based on actual sales.
The taxes, together with increasing competition from heavily subsidized Middle Eastern competitors, have forced the European airlines out of the Philippine market over the last decade.