House panel projects lower fares

MANILA, Philippines - The committee on ways and means of the House of Representatives expects lower international plane and ship fares with the grant of tax exemptions to foreign carriers.

Committee members said the tax benefits should be passed on to passengers in terms of lower fares.

They said lower fares could translate into more foreign tourists visiting the country and more Filipinos going abroad on vacation.

They said the tax exemptions could also prompt European airlines to restore direct flights to Manila.

The tax privileges are contained in Republic Act 10378, which President Aquino signed last March 7. The new law was published in The STAR yesterday. It takes effect 15 days after its publication in at least two national newspapers.

Jay Hernandez, a technical assistant of the ways and means committee, said the law removes the 2.5-percent income tax, 12-percent value added tax (VAT) and three-percent common carrier’s tax on international passenger carriers.

He said these carriers would enjoy such tax exemptions provided that their home countries extend reciprocal privileges to Philippine airlines and shipping companies.

“The exemptions should be covered by reciprocity, tax treaties and international agreements,” he said.

He said at present, the country has tax treaties with 37 countries.

He added that of the 37, Philippine Airlines, Cebu Pacific and other domestic carriers are flying to only 17 countries.

Hernandez pointed out that the tax exemptions apply only to passengers and that cargo, including mail, would continue to be imposed the applicable taxes.

He also said under the new law, international carriers cannot claim input and output VAT, which represents tax deductions for VAT payments.

The law mandates the Department of Foreign Affairs and the Department of Finance (DOF) to oversee the exchange of notes between the Philippines and concerned countries for the extension of reciprocal tax privileges to passenger carriers.

The DOF, in coordination with the Bureau of Internal Revenue, would issue implementing rules on the exemptions within 30 days from the time the law takes effect.