This is a re-posted article.

THE COMMON carriers tax (CCT) must be abolished because it discriminates against international air and shipping lines, the National Tax Research Center (NTRC) said.

“At present, there are no known taxes in other countries similar to the CCT of the Philippines that is imposed only on foreign carriers and not on local carriers,” the NTRC said in its latest report.

“Hence, the imposition of CCT on foreign carriers is tantamount to tax discrimination that may violate international agreements with...the ICAO (International Civil Aviation Organization) and the WTO (World Trade Organization),” it continued.

Various business groups have already urged the government to do away with the CCT -- a 3% tax on the gross receipts of international carriers, arguing it has forced some foreign carriers to cut back operations in the country.

Air France-KLM, the sole European carrier operating in the Philippines, phased out its direct flights between Manila and Europe in April. Qatar Airways also halted all direct flights between Doha and Cebu in March.

There are already moves in Congress to repeal the CCT. The House of Representatives has approved House Bill 6022, scrapping the CCT. A counterpart measure is expected to be discussed in the Senate once sessions resume next week. “The repeal of the CCT is consistent with international practice not to hinder growth of tourism, employment and reduction of poverty in the country,” the NTRC said.

It noted, though, that there would be a sizeable revenue loss, earlier estimated at P1.6 billion by the Finance department.

“The CCT should then be removed provided that there will be countervailing revenue sources/measures that will compensate for the revenue loss,” it stressed.

While the NTRC supported the complete abolition of the CCT, it set conditions for the removal of the gross Philippine billings tax (GPBT). The GPBT is a 2.5% tax on the operations of foreign carriers in the country. It is slapped on gross revenue from the “carriage of persons, excess baggage, cargo and mail originating from the Philippines in a continuous and uninterrupted flight.”

NTRC suggested that the GPBT should be cut or removed only if the beneficiary country has a tax treaty with the Philippines. The exemption could also be granted if the home country of the foreign carrier likewise grants the same tax break to Philippine carriers.

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Source: Diane Claire J. Jiao, BusinessWorld (15 July 2012)

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