House body okays bill on tax exemptions under PHL-int'l carriers treaties

February 21, 2011 11:14 pm 

MANILA, Feb. 21 — The committee on ways and means of the House of Representatives has approved a proposed measure that recognizes the tax exemptions under tax treaties entered into by the Philippines with international carriers.

House committee chair and Batangas Rep. Hermilando Mandanas, author of House Bill no. 3928, said the measure aims to empower the executive branch to execute the tax exemptions under tax treaties and agreements signed by the country related to international carriers.

"There are no economics involved here. We just want to be a responsible member of the global community by complying with the international tax treaties and agreements we signed. And we want to convey the issue that the Department of Finance (DoF) and Bureau of Internal Revenue (BIR) would comply with these treaties and agreements," he said.

Mandanas said there could be a separate bill on amending taxes for the sake of improving tourism in the country.

"But this particular bill we approved is just to underscore that our country is going to comply with all the tax treaties and international agreements it signed relating to international carriers," he noted.

According to Theresa Genevieve Co, lawyer of the BIR tax affairs division, the existing tax treaties cover only taxes on income and capital and do not include the Common Carrier's Tax (CCT).

Co said Section 135 of the National Internal Revenue Code of 1997 provides for the excise tax exemption of petroleum products sold to international carriers of Philippines or foreign registry on their use or consumption outside the Philippines.

The proposed measure provides for an amendment of the National Internal Revenue Code of 1997, in particular Section 28 (A) (3) on Tax on Resident Foreign Corporations and Section 118 on Percentage Tax on International Carriers to recognize the tax exemptions of international air and shipping carriers.

Mandanas projects that the government would earn US$ 38 million to US$ 78 million from rejuvenated tourism, and an additional US$ 1 billion of boosted export earnings by exempting international air carriers from paying the Gross Philippine Billings Tax (GPBT) and the three percent Common Carrier's Tax (CCT).

Mandanas said the Philippines is the only country that charges GPBT and CCT taxes on international civil aviation and sea travel. Both taxes are levied on all revenues, passengers, cargoes and excess baggage leaving the Philippines regardless of the point of sale or payment of the ticket, passage or freight documents, whichever is the case.

From the viewpoint of international carriers, such impositions violate the non-discrimination principle of the World Trade Organization, he said.

"This WTO (World Trade Organization) principle states that a member state such as the Philippines should not discriminate between its own and foreign products and services," the Batangas solon said.

Meanwhile, House Deputy Minority Leader and Quezon Rep. Danilo Suarez said a technical working group (TWG) to include representatives from different flag carriers particularly the country's very own Cebu Pacific and Philippine Airlines (PAL) will conduct a review on the issues of reciprocity and the disadvantages and advantages of the proposed measure.

"The TWG might take months to come up with a final version of the proposal. I can see through business competition that this can make the country a major destination especially for tourism," he said.

"During the last nine years of the Arroyo administration, the country spent P115 billion to upgrade its airports. It will be sheer waste of time and money if we have airports without passengers and without airlines landing or taking off," he added. (PNA)



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