The Philippines’ revised common carriers tax policy, issued on July 20, 2011, faces strong opposition from foreign airlines operating in the country, claiming it put them at a disadvantage with their local counterparts.
In a formal letter, the Board of Airline Representatives, made up of 30 international carriers with routes to the Philippines, said the new tax mandate under Revenue Regulations 11-2011 was discriminatory since Philippine air carriers are exempted from it.
The government said Revenue Regulations 11-2011 amended Revenue Regulations 15-2002 to ease the common carrier tax burden of foreign air and shipping lines, but the foreign carriers said it did not address their concern.
John Forbes, legislative committee chairman of the American Chamber of Commerce in the Philippines, said in a message that the government move “was missing the point and perpetuates the unlevel [sic] playing field between Philippine and foreign carriers. This decision will not help tourism and seems likely to discourage new airline service into the country by taxing their passengers directly.”
The new tax code changed the tax base from the previous average billing to actual billing per passenger, according to a report from BusinessWorld Online. The new regulation also added rental fees, advance payments, penalties and other service charges in computing the tax, aside from ticket price, excess baggage fees, cargo fees, and mail fees.
Under the revised tax regulation, international air carriers must pay a 3 percent common carrier tax on gross receipts and a 2.5 percent tax on all cargo and passenger revenues originating from the Philippines in an uninterrupted flight. Foreign shipping and cruise lines are also subject to the same taxation.
In a recent interview, Steven Crowdey of Delta Airlines said the Philippines was the only country in Asia looking to impose more taxes on air carriers. “In neighboring countries, airports and agencies often offer incentives for carriers to fly,” he said.
The foreign airlines said the new ruling will only make the tax computations more onerous. Noting that no consultation was held before the new regulation was issued, they called for its suspension to allow them to present a position paper calling for its abolition.
