Airfare up as jet fuel soars: Round trip Cebu-Manila fare now P10,000

Stalled for some four months, additional tax on airfare and freight will finally be imposed tomorrow as the expanded value added tax law takes effect. Average round trip regular fare Cebu-Manila-Cebu is now P10,000. Jet fuel is trading at $70 to $100 per barrel in world markets.

Carriers Philippine Airlines, Air Philippines and Cebu Pacific all confirmed yesterday that these will pass on value added tax of 10 percent from gross receipts of domestic operations in ticket fare and cargo fees.

PAL has since clarified that additional tax impositions are not to be construed as fare increase but "merely a tax that the carrier is collecting in behalf of government.

Senate and Congress approved the EVAT law or RA 9337 in June that imposed 10 percent of value added tax on gross sales generated from domestic operations of ships, airlines and operators of taxicabs, utility cars and rent-a-car. The 10 percent will be taken from the amount to be paid by the passenger or cargo shipper and added up to make the total amount to be paid.

This will then bring one-way fare for Cebu to Manila to an average of P4,800 or close to P10,000 for round trip. Based on June rates, add-ons to the base fare of P3,500 for one way include P470 as fuel surcharge, P300 for insurance and P15 for aviation security. Of this total, VAT is equivalent to approximately P428.50. Other charges have been added on ticket fare over the past five months.

Painful VAT

President Arroyo signed the EVAT law in efforts of raising revenues to haul out the country from a yawning budget deficit. Its implementing rules are contained in a Bureau of Internal Revenue guideline. The law specifically allows airlines to pass on costs of additional charges in airfare and cargo fees after the no-pass-on clauses were scrapped from the original draft.

The Supreme Court issued a temporary restraining order against the tax measure on issues of constitutionality immediately after the president signed it in June. But the higher court eventually lifted the restraining order in October declaring it as constitutional.

Airlines and tourism practitioners are apprehensive that heavy tax burdens and high travel costs will make it difficult for airlines to sustain viable operations. Average price of jet fuel in international markets is at $62 to $70 and some paying up to $100 to $130 per barrel. Fuel is the single biggest expense of airline costs comprising 40 percent.

But Malacañang said the EVAT definitely goes into effect tomorrow in raising P80 billion to P120 billion in revenues annually. President Arroyo was earlier reported to have been willing to risk her political fate for long term benefits by addressing the fiscal deficit through the "painful VAT." - Ruth G. Mercado