DAVAO CITY – A new law that will remove certain taxes being imposed on international air carriers and shippers has been signed by President Benigno S. Aquino III.
Republic Act No. 10374, which recognizes the principle of reciprocity as basis for the tax relief to foreign carriers, seeks to boost tourist arrivals and facilitate lower and more affordable fares.
The President said the new law will exempt all international and shipping carriers from paying the three percent common carriers tax (CCT) on receipts and income derived from transporting passengers
The measure also waives the 2.5% gross Philippine billings tax on international airlines and shippers provided that their home countries will give a similar tax exemption to Philippine carriers.
Aquino, at the signing ceremony during a travel convention at the SMX Convention here, acknowledged that the new law will cause some revenue loss for the government but would boost tourist arrivals since air and sea fares will be reduced.
“This will actually mean an initial loss in revenue for us; but it is ultimately a strategic move. Airlines have long asked for this measure, since it will only bring in more traffic, and facilitate connectivity among our countries,” the President said.
“With this bill, everybody wins: from our aviation industries, to our tourism industries, to the millions of our peoples who will have greater freedom in planning their trips. So I would like to thank our legislators who worked on this. In light of all this good news, maybe (Tourism) Secretary (Ramon) Jimenez will consider revising his targets again,” he said.
The government has revised its 2016 target of domestic travelers to 56.1 million after the previous target of 35.5 million was already surpassed. International tourist arrivals, on the other hand, have increased to almost 4.3 million in 2012, from 3.1 million in 2009.
The new law will take effect 15 days after the publication in the Official Gazette or at least two national newspapers.
Finance Secretary Cesar Purisima, in coordination with Internal Revenue Commissioner Kim Henares, has been directed to craft the implementing rules and regulations not later than 30 days upon effectivity of the new law.
The President, meantime, welcomed the decision of the International Civil Aviation Organization (ICAO) to lift the Significant Safety Concerns previously issued to the Philippines.
He said ICAO expressed “great satisfaction” with the country’s efforts to comply with international safety standards and address previously identified safety concerns.
“This gives all of us great confidence that, as we continue to improve our aviation industry, we may soon see our removal from the watch lists of the European Union and the United States. So, perhaps before I step down from office, we will see our own airlines flying to Rome, Paris, and other cities in Europe and North America – giving us greater access to these markets, and vice versa,” he said.
Aquino said the country’s tourism industry is expected to grow further as the Philippines is set to host a number of global meetings, including the the East Asia Summit of the World Economic Forum in 2014 and Asia Pacific Economic Conference (APEC) Leader’s Summit in 2015.
For years, the high cost of CCT has caused carriers with extensive global networks to leave the Philippines.
Direct flights between Philippines and Europe have declined significantly from 22 in 2001 to 7 in 2010 and to zero in 2012. U.S. carriers operate only 16 flights per week, compared to 24 in 2001.
“The President’s signing into law the rationalization of the CCT will certainly help improve and enhance the country’s competitiveness in the international travel arena,” the Department of Tourism said. (With a report from Jacky Lynne A. Oiga)