The Philippine Senate recently passed on final reading a bill removing the Gross Philippine Billings Tax (GPBT) and the Common Carriers’ Tax (CCT), which have turned off many international airlines from operating in the Philippines.
The senators voted 16-0 in favor of Senate Bill 3343, certified urgent by President Benigno Aquino III.
Based on the approved version, the GPBT and the CCT will be scrapped only if the mother country of a foreign airline flying to and from the Philippines agrees to a reciprocal arrangement for Philippine-flag carriers.
The Philippines currently imposes a 2.5% GPBT and 3% CCT on foreign airlines, but not on local carriers. Foreign airlines have cited the uneven level-playing field as a result.
With the scrapping of the GPBT and CCT, the Philippines stands to lose about P2.5 billion in revenues. Government is optimistic it can earn back the revenues through more flights from foreign carriers and increased tourist arrivals.
Before the bill was passed, the International Air Transport Association (IATA) called on the Philippines to dump the taxes, which the association said could translate to potential gains of about $78 million — bigger than what the country could lose.
IATA said removing the taxes will also stimulate the international cargo industry.
The Board of Airline Representatives (BAR) and the Philippine Travel Agencies Association (PTAA) also called for the scrapping of the levies.
BAR said removing the CCT and GPBT will increase foreign investments and help develop secondary gateways while PTAA said the measure will sustain momentum in the airline industry.
The levies have prevented foreign airlines from mounting direct flights to the Philippines. Citing the policy, Dutch national carrier KLM stopped its direct Amsterdam-to-Manila service. As a result, no other foreign airline offers a direct service from Europe to the Philippines.
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