Airlines back CCT removal

MANILA, Philippines - Direct flights between Manila and Europe would immediately resume as soon as the government removes the common carriers tax (CCT), further boosting the country’s campaign to attract 10 million tourists by 2016, the Airline Operators Council (AOC) at the Ninoy Aquino International Airport (NAIA) said.

The group said the proposal of Sen. Ralph Recto to eliminate the CCT on international carriers is expected to boost tourist arrivals by 70,000 on the first year and help create 70,000 new jobs.

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

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

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

The airline now flies between Manila to Amsterdam viaTaipei-Manila so as not to finally cut the link with Europe, according to Ma. Lourdes San Juan, assistant station manager.

The airline companies have complained before the Bureau of Internal Revenue (BIR) that the CCT charged against them was based on the tax reflected on the ticket.

However, the AOC said tickets fares are usually higher than actual fares paid for by passengers, which the BIR could tax based on the actual sales as reported by the airline companies.

AOC president Ed Monreal said many European airlines have ceased operations in the Philippines because of the CCT, 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.

AF-KLM’s decision to stop direct flights between the two cities was prompted by the government’s insistence on charging a three-percent common carriers tax and a 2.5-percent gross Philippine billings tax on cargo and passenger revenues originating from the country.

The same 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.

Airlines that seized operations in Manila include British Airways, Lufthansa (Germany); Alitalia (Italy); Swiss International Airlines; and Air France (which has code-sharing arrangement with KLM).

Civil Aeronautics Board (CAB) executive director Carmelo Arcilla 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 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.

Finance Secretary Cesar Purisima said the revised regulation, if approved, should be able to address the problems raised by foreign carriers.

Under the National Internal Revenue Code, international air carriers are slapped a 5.5 percent tax on revenues – a three-percent common carrier tax on their gross receipts and a 2.5 percent tax on all cargo and passenger revenues originating from the Philippines in an uninterrupted flight, regardless of the place of sale or issue of a ticket.

There are pending measures in Congress seeking to remove the common carriers tax and the gross Philippine billings tax, which would translate to an additional $1 billion in export earnings for the Philippines.