1. Manila airport on heightened alert again
MANILA, Philippines—The authorities have placed the Ninoy Aquino International Airport on heightened alert in the wake of Tuesday’s deadly bus bombing on Edsa, deploying twice the usual number of security guards and increasing patrols by bomb-sniffing dogs.
The heightened alert came a day after airport officials announced a similar heightened state of alert at the airport following a terrorist attack on an airport in Moscow.
Vicente Guerzon Jr., the Manila International Airport Authority’s assistant general manager for security and emergency services, said the 600 security guards has been doubled, and so has the 60 members of the Philippine National Police Aviation Security Group assigned at the airport complex.
He said airport police were also conducting more patrols and intensifying intelligence activities.
“We're gathering and sharing intelligence with other agencies to update our security assessment,” he said in an interview.
So far, he said there have been no intelligence reports indicating the NAIA might be the target of a terrorist attack.
“We're also regularly having K-9 patrols at the three terminals,” he added. Security personnel also routinely check incoming passenger buses and taxis for any suspicious packages, Guerzon said.
He said the authorities have also begun the process of acquiring full-body X-ray scanners by next year.
Guerzon said his office had submitted the terms of reference for the “high-value” acquisition to the bids and awards committee.
He said they would also hold talks with the Commission on Human Rights to discuss the parameters of the use of the full-body scanners, noting that the equipment has drawn resistance in places like the United States.
The raised alert level at NAIA also came in the aftermath of the bombing at a Moscow airport that left more than 30 persons dead and several dozen others injured.
MIAA General Manager Jose Angel Honrado earlier said he was closely monitoring the situation in Russia and watching out for information that might point to the NAIA terminals as a possible target.
2. Pilot schools to be moved out of NAIA
THE CIVIL Aviation Authority of the Philippines (CAAP) wants aviation schools to transfer to regional airports to decongest from the Ninoy Aquino International Airport (NAIA).
Ramon S. Gutierrez, CAAP officer-in-charge, told reporters at the sidelines of an aviation summit last week the state-owned Manila International Airport Authority (MIAA) will take charge in the implementation of the plan.
“The plan is still in principle and we are actually expecting resistance from the aviation school administrators, owners and students as most of them are foreigners. Most of the foreign students want to attend an aviation school near NAIA because they go to their home countries from time to time,” he said.
However, Mr. Gutierrez said allowing regional airports to house the aviation schools would translate to additional revenues as most of these airports have lower flight frequencies compared with NAIA.
“This will be part of CAAP and MIAA’s immediate plans. This will give these small airports additional revenues as they only generate revenues from air navigation fees for the airports,” he said.
Mr. Gutierrez said his agency broke even last year with close to P3 billion in revenues.
“Our revenues last year will be just enough for the maintenance but will not be enough for capital expenses. It will not be enough to maintain 86 airports. We will give the schools the preference which regional airport they would want to go to,” he said.
In July last year, CAAP ordered an audit of all 63 aviation schools in the country as the agency discovered that fake licenses had been issued to some student pilots.
3. How friendly are the Philippine skies?
In an effort to enhance competition in an already vibrant airline industry, the Philippines is taking a major step towards easing restrictions within the commercial aviation sector. Government has announced that an executive order will be issued that will further liberalize the air transportation industry by allowing international airlines to use secondary gateways, a privilege previously exclusive to domestic carriers. Along with the increase in the number of stakeholders and the regulatory challenges, tax is certain to be an issue intertwined with flying in and out of the Philippine skies.
The taxation of revenues of international carriers, regardless of whether they have so-called "permanent establishments" in the Philippines, has been the subject of debate since the concept of Gross Philippine Billings was introduced by Presidential Decree (PD) 69 in 1972.
In the recent decision of South African Airways vs. Commissioner of Internal Revenue, G.R. No. 180356, promulgated Feb. 16, 2010, the Supreme Court held that "if an international air carrier maintains flights to and from the Philippines, it shall be taxed at the rate of 2.5% of its Gross Philippine Billings, while international air carriers that do not have flights to and from the Philippines but nonetheless earn income from other activities in the country will be taxed at the rate of 32% (now 30%) of such income." In so ruling, the High Court dismissed claims that international carriers without landing rights in the Philippines are exempt from paying income tax. The Supreme Court effectively reiterated its ruling in the landmark 1987 case of British Overseas Airways Corp. that offline carriers with local general sales agents are considered resident foreign corporations doing business in the Philippines, thus tickets sales are subject to corporate income tax under Sec. 28 (A)(1) of the Tax Code.
Prior to the South African Airways case, the taxation rules on foreign carriers were not as clear. Under PD 1355, which amended the 1977 Tax Code, gross Philippine billings (GPB) include gross revenue derived from the sale of tickets in the Philippines covering the carriage of passengers from anywhere in the world and cargo or baggage originating in the Philippines. In the 1997 Tax Code, however, GPB was redefined to only include the "amount of gross revenue derived from carriage of persons, excess baggage, cargo and mail originating from the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale or issue and the place of payment of the ticket or passage document."
This new concept had raised issues on the taxability of offline carriers on their income from the sale of tickets in the Philippines through their local agents. At first blush, it appears that since these carriers do not transport passengers and cargo from the Philippines, they are not subject to tax since they do not derive taxable GPB as defined under the 1997 Tax Code. This also meant that offline carriers cannot thus be considered as nonresident foreign corporations doing business in the Philippines.
However, in the case of Air Canada vs. Commissioner of Internal Revenue, CTA (First Division) Case No. 6572, promulgated Dec. 22, 2004, the CTA held that offline carriers are considered resident foreign corporations since they are doing business in the Philippines. Citing Supreme Court rulings, the CTA reasoned that a foreign airline selling tickets in the Philippines through its local agents shall be considered as engaged in trade or business, as these activities show continuity of commercial dealings performed in pursuit of business purpose. Such ruling was sustained by the CTA En Banc in the appeal made by Air Canada (CTA EB No. 86, promulgated Aug. 26, 2005).
The Supreme Court sustained the Air Canada ruling in the South African Airways decided in 2010.
In the South African Airways case, the Supreme Court noted that there are no specific criteria as to what constitutes doing business. The Supreme Court held that the term "engaged in business in the Philippines" implies "continuity of commercial dealings and arrangements" which includes the performance of acts pursuant to the purpose and object of the business organization, such as the appointment of a local agent. Since the sale of tickets -- the activity which produces the income -- is done in the Philippines even if the carriage of person, baggage, cargo or mail is done outside the Philippines, it is a Philippine-sourced income subject to tax.
From these rulings, it can be inferred that the courts steadfastly held to the source principle in Philippine income taxation, which contemplates the idea that an alien is subject to Philippine tax if he or she derives income from sources within the Philippines. This is not at all contradictory to the subject of tax on GPB because the situs of taxation is still the primary consideration. In case of airlines with landing rights in the Philippines, the determination of the situs of taxation is the service which is provided in the Philippines, i.e., the carriage of persons or cargo from the Philippines. For offline carriers, on the other hand, the determination of the status of tax is the place of sale of tickets, such that if the tickets are sold in the Philippines, the income from these sales is subject to tax.
International airlines that will take advantage of Government’s pocket open skies policy will be subject to the GPB tax regime since they would carry passengers from domestic locations and fly them to international destinations.
Now that the Supreme Court has clarified the rules on the taxability of foreign carriers, the willingness to open the market to cross-border investments could very well result in more revenues for Government, increased participation of foreign players and improved services from local airlines at competitive prices that will benefit the flying public.
4. P80-million fund for NAIA's VOR not included in P4-billion deal — CAAP
MANILA, Philippines (PNA) — Civil Aviation Authority of the Philippines (CAAP) Director-General Ramon Gutierrez on Thursday said that the P80-million would-be fund to purchase new aviation equipment is not included in the P4-billion aviation deal.
Gutierrez said the P4-billion aviation deal between the government and the Thales-Sumitomo Group that Senator Estrada had questioned was accorded in 1998. “Ours is different. The P80-million fund was only meant to buy a new very high frequency omni-directional range (VOR) for the Ninoy Aquino International Airport (NAIA).”
According to him, the P4-billion contract was intended for the modernization of the whole air traffic control system of the country.
He said since the CAAP has diminutive resources and cannot be able to procure such device, the Manila International Airport Authority (MIAA) will make the financial arrangement while the aviation agency takes care of the services. From its original P120-million funds they requested, the budget was slashed to P80-million.
However, the P80-million is P2-million short of the VOR’s original price in the foreign market. He disclosed that he was considering a Korean company that was offering a VOR that is worth P80-million. “But we could not grab it until we know that it is the same brand that we are currently using,” Gutierrez said.
Another foreign company has offered the CAAP of equipment leasing which cost only P50-million. “Malaki ang matitipid, sa open bidding, but, we are inclined to buy a new one because its life span is approximately 10 to 12 years.”
The old VOR made headlines when it conked out on June last year that triggered the cancellation of at least 50 domestic and international flights at the three terminals of the Ninoy Aquino International Airport.
The glitch was additional burden to the Philippines when it was working out for getting back the category 1 status after the United States Federal Aviation Administration downgraded the Philippine aviation to category 2 in 2008.
Asked if he is optimistic that the European Union would lift restrictions once the foreign evaluators resume inspection in September, this year, he said they are still preparing for such assessment.
The Philippines is one of the countries in the world that has been blacklisted by the European Community where the country’s all airlines are banned from flying to any European bloc because of “serious safety deficiencies” in the Philippines’ regulation of carriers.
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