Tax killing Manila bound Long-haulers?

October 13, 2010

The International airline alliance is threatening to pull out operations in Manila should the Philippine government continue with its discriminatory tax policy against its members.

The Board of Airline Representatives, whose members include 30 air carriers that have international connections from the Philippines, have been up in arms against the government's discriminatory tax regime that favored heavily domestic carriers, says Steven Crowdey of Delta Airlines.

"No other country burdens foreign carriers with revenue taxes, taxes that are generally in excess of the wafer thin airline industry margins" said Crowdey.

International air carriers used to be covered by a 3-percent common carrier tax, but they are now also subject to a 12-percent value added tax.

"These taxes are not applied to Philippine carriers, meaning the operating cost playing field is far from level" Crowdey adds.

Foreign carriers have been complaining for the past 12 years of the Philippines discriminatory taxation regime saying that the common carrier tax and gross Philippine billings were a disincentive for airlines to fly through Manila.

The government has been collecting airline revenue taxes, not just on revenues generated in the Philippines but also on tickets sold in other counties too.

The group says the carriers that have stopped flying into Manila are British Airways, Air France, United Airlines, Alitalia, Swiss International, Aeroflot, Garuda Indonesia, Egypt Air and Pakistan International Airlines.

According to Crowdey only the Philippines charges such taxation system.

“By contrast, neighboring countries’ airports and agencies often offer incentives for carriers to fly into them.” he said.

The airline association also laments the Burdensome Customs, Immigration and Quarantine charges, where multiple airlines all pay for the same meal, same transport and same overtime for inspectors.

"Not having a 24/7 CIQ service and still incurring overtime charges for anything outside "normal" office hours belongs to a byegone era" Crowdey explains.

The government has been talking about tourism promotions, yet it has burdensome and costly processes to collect tourism taxes.

"Tourism has huge potential to provide ample and rewarding employment. Instead the only new flights to Manila are catering for the ever increasing needs of the OFW’s for which there is not employment in manufacturing and tourism at home with their families in the Philippines" says Crowdey.

The foreign airline sentiments has been echoed by no less than the government's Tourism Secretary Alberto Lim who admitted during the House Committee of Appropriations budget hearing of the 2011 proposed P1.3-billion budget for the Department of Tourism held at the House of Representatives.

Lim attributed the situation to the country’s limited tourists inflow because of the hefty Common carrier tax, Gross Philippine Billing Tax and CIQ overtime charges that the Philippines imposes on foreign airlines.

“We are the only country in the world that implements this system. This forces the American and European airlines to withdraw their flights because they found better opportunities in other countries” Lim was quoted as saying.

Meanwhile, KLM has threatened to pull out of the country late last month because of its dispute with the governments inland revenue on the common carrier tax.

The Dutch carrier is the only remaining airline to fly from Europe. Lufthansa, British Airways, Air France, Alitalia, Swiss International, and Aeroflot has already left the country.

The Philippine Chamber of Commerce and Industry (PCCI) has been pushing the Aquino government to rationalize tax policy and eliminate the common carriers tax and the gross Philippine billings charges that increase transport costs to the country.