Neha Jain: http://philippinesaviationnews.blogspot.com/23

1. House committee OKs scrapping of airline carriers' tax

MANILA, Philippines - The House ways and means committee has approved a bill recognizing the need to exempt international airlines from Philippine taxes under treaties and international agreements to which the Philippines is a signatory.

House Bill 3928 was reported out for plenary deliberations after the Technical Working Group (TWG) that included representatives from different flag carriers particularly Cebu Pacific and Philippine Airlines finished the review on the reciprocity and the disadvantages of the proposed law.

Legislators said that the government is expected to earn $38 million to $78 million from tourism and an additional $1 billion in export earnings by exempting international air carriers from paying the gross Philippine billings tax (GPBT) and the 3% common carrier’s tax (CCT).

“I can see through business competition that this can make the country a major destination, especially for tourism,” said Lakas-Kampi-CMD Rep. Danilo Suarez of Quezon, a senior member of the panel.

“During the last nine years of the Arroyo administration, the country spent P115 billion to upgrade its airports. It will be sheer waste of time and money if we have airports without passengers and without airlines landing or taking off,” he added.

Liberal Party Rep. Hermilando Mandanas of Batangas, committee chairman and author of HB 3928, said the measure aims to empower the executive branch to execute the tax exemptions under tax treaties and agreements signed by the country related to international carriers.

“There are no economics involved here. We just want to be a responsible member of the global community by complying with the international tax treaties and agreements we signed. And we want to convey the issue that the Department of Finance and the Bureau of Internal Revenue (DOF) would comply with these treaties and agreements,” said Mandanas.

Mandanas said there could be a separate bill on amending taxes for the sake of improving tourism in the country.

“But this particular bill we approved is just to underscore that our country is going to comply with all the tax treaties and international agreements it signed relating to international carriers,” Mandanas said.

During the hearing, Theresa Genevieve Co, lawyer of the Bureau of Internal Revenue (BIR) tax affairs division, said that the existing tax treaties cover only taxes on income and capital and do not include the CCT.

Co said Section 135 of the National Internal Revenue Code of 1997 provides for the excise tax exemption of petroleum products sold to international carriers of Philippine or foreign registry on their use or consumption outside the Philippines.

The bill provides for an amendment of the National Internal Revenue Code of 1997, as amended, in particular Section 28 (A) (3) on Tax on Resident Foreign Corporations and Section 118 on Percentage Tax on International Carriers to recognize the tax exemptions of international air and shipping carriers.

Mandanas said the Philippines is the only country that charges GPBT and CCT taxes on international civil aviation and sea travel. Both taxes are levied on all revenues, passengers, cargoes and excess baggage leaving the Philippines regardless of the point of sale or payment of the ticket, passage or freight documents, whichever is the case.

He said that from the viewpoint of international carriers, such impositions violate the non-discrimination principle of the World Trade Organization.

“This WTO principle states that a member state such as the Philippines should not discriminate between its own and foreign products and services.

2. Cebu Pacific seeks partnership with flight training schools

MANILA, Philippines – Cebu Pacific is seeking partnerships with flight training institutions approved by Civil Aviation Authority of the Philippines (CAAP).

After the success of CEB’s grand recruitment event last February 11, the airline announced another innovative way to source high quality personnel for its growing workforce by creating a sustainable crew resource program.

Cebu Pacific opens the doors for partnerships with quality flight training organizations. According to CAAP, there are approximately 50 registered flight training institutions in Clark, Subic, Pasay, Bacolod, Zambales, Lapu-Lapu, and Manila, among others.

“We encourage the leading flight training organizations from all over the Philippines to develop competitive proposals and send them to Cebu Pacific so we can forge a partnership with them. This will help their students secure employment with Cebu Pacific after graduation,” said CEB VP for marketing and distribution Candice Iyog.

Interested flight training institutions should contact CEB’s Special Projects Office for a request for tender document.

“As the country’s largest airline, CEB continues to find innovative ways to support its growing workforce. This will deepen our pool of technical experts in various airline functions and ensure that CEB strengthens its high-quality value proposition to its passengers.” Iyog said.

Iyog added that this is a win-win situation for both the flight training organization and the airline. “CEB looks forward to welcoming even more qualified individuals into the CEB family, as we take delivery of more brand-new Airbus A320 aircraft."

The airline has already received four brand-new Airbus A320 from October 2010 to January 2011. By the end of 2011, CEB will be operating a fleet of 37 aircraft with an average age of less than 2.5 years one of the most modern aircraft fleets in the world. Between 2012 and 2014, Cebu Pacific will take an additional 16 Airbus A320 aircraft. (EHL).

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3. Back to 'dagdag bawas' polls?

While it seems Malacañang might get its wish to have this year’s elections in the Autonomous Region in Muslim Mindanao (ARMM) postponed and synchronized with the May 2013 polls, the debate continues on whether the ARMM polls should push through or not, especially with the prevailing view that it is needed to strengthen democratic institutions in the region.

But besides pushing through with the elections, the government should also listen to the call of non-partisan groups like the Parish Pastoral Council for Responsible Voting (PPCRV) and the Consortium for Electoral Reforms (CER) for the Commission on Elections (Comelec) to use of the Precinct Count Optical Scan (PCOS) machines in the ARMM polls this August. These PCOS machines, which were leased through public bidding from the consortium Smartmatic-TIM, were first used in the Philippines’ successful first crack at poll automation in the May 2010 presidential elections.

PPCRV chairperson Henrietta De Villa has said that the use of the PCOS machines would facilitate voter education.

Groups like the previously unheard of Center for People Empowerment in Governance (CenPEG) are claiming that Smartmatic-TIM’s system of using PCOS machines was “inherently defective” and “flawed,”conveniently omitting the fact that the tried-and-tested technology had prevented massive cheating.

A series of email threads between CenPEG’s proponents, AES Watch and its allies gives us a glimpse of the true agenda of the groups bent on scrapping the automated system that has proven to be successful in ensuring the conduct of clean, honest, orderly and peaceful elections last year.

This thread points to a possible conspiracy among non-government organizations and their allies watchdogs to undermine the country’s first-ever computerized polls right from the start, in an apparent “grand design” to arm-twist Comelec into junking at the last minute the Automated Elections System (AES) in favor of an alternative electoral scheme in last May’s national balloting.

Among the correspondents in this email thread are so-called critics of the AES project who have been pushing a rival electoral mode — the Open Election System (OES)

This system proposes that voting and counting remain manual at the precincts, and later on, the manually produced election returns are physically brought to the City/Municipal Board of Canvassers, where they will be encoded (data-entry) by different operators into a semi-automated Canvassing System. In a nutshell, back to the old manual fraudulent elections, but adding more power to anonymous encoders to tip the results by manipulating the canvassing.

After looking at various sections of R.A 9369, it is clear that this system, which has never been used, and so far has only been mentioned of, but never actually demonstrated, is not compliant with many provisions of the law, and therefore is ineligible. The law is very specific in mentioning that automation must include the counting, and must start at the precinct.

Observers say that these critics who have incessantly been raising trumped-up charges of massive May 10 poll irregularities have planned all along since last year to stoke public doubts on the Comelec’s supposed lack of preparations for the automated polls and then harp on a ‘failure of elections’ in an apparent last-ditch effort to pressure the government into abandoning the AES project and possibly consider an alternative mode at the very last minute.”

Besides the email thread, news stories indicate that CenPEG, Namfrel, AES Watch, together with individuals like Manu Alcuaz, and Gus Lagman, have been doing all they can to get control over Comelec and revert the elections back to the old manual system.

One name stands out in all these articles and email exchanges, that of IT “expert” Gus Lagman, who is also the main proponent of the OES.

Results of separate surveys done by SWS and Pulse Asia showed that most Filipino voters were satisfied with the conduct of the May 10 electoral exercise and considered it the most credible compared to previously held national polls.

Moreover, a StratPOLLS postelection survey covering eight key areas of Metro Manila in June showed that 97 percent were satisfied with the overall performance of poll. In fact, satisfaction ratings of 100 percent were registered in Manila, Makati, Valenzuela and Las Piñas.

Tough task ahead

After posting a record-high cash collection last year, the Bureau of Customs (BOC) is now in a quandary over how to achieve its revenue collection goal this year in light of the strong peso. Customs commissioner Angelito Alvarez was recently quoted as saying that they will be off target by P400 million on a month-on-month if the exchange rate hits below P43 to a dollar.

This situation will be a tougher one for Alvarez given BOC’s good showing last year. BOC made history in 2010 when it generated cash collections of P227.5 billion, 14.4 percent higher than 2009. Although it was still below the P241.6 billion goal set by the finance department, it was still a record-breaking performance as it surpassed the previous highest cash collection of P218.2 billon posted in 2008.

During the last six months of 2010, the BOC twice broke the P20 billion monthly cash revenue barrier. And they all happened under the same circumstances as now where for every one peso improvement in the peso exchange rate, it costs BOC almost P400 million a month. The revenue forecast for 2010 was pegged at P45 to a dollar but the peso strengthened to P44.62 in April, P44.31 in September and P43.44 in October.

The agency is also faced with high utilization of tax credit certificates and the reduced, if not zero, duties being enjoyed by a number of commodities due to the country’s compulsory compliance with various trade agreements such as the Asean Free Trade Agreement and the Japan-Philippines Economic Partnership Agreement.

Among the steps which Alvarez had taken to mitigate the external factors affecting their collection goal was the strengthening of the BoC’s Run-After-the-Smugglers program and the re-launch of its Informants Rewards System which guarantees tipsters a 20 percent share of whatever the agency will be able to recover out of the cases that will be filed based on the information provided.

These programs paved the way for the filing of charges against 122 importers, brokers and customs employees from July-December 2010. They also resulted in the confiscation of more than P5 billion worth of assorted commodities that were either misdeclared, undervalued or misclassified by their importers.

But BOC is up for a tougher challenge – that is to achieve the assigned collection target of P320 billion for 2011.

On flying safely

Up for government approval is a $200 million project of the Department of Transportation and Communications for a new Communication, Navigation and Surveillance/Air Traffic Management (CNS/ATM) system.

Europe has blacklisted all Philippine airline companies from flying to its airspace. The US has downgraded its rating for Philippine civil aviation. Late last year, the landing control system at the Ninoy Aquino International Airport broke down, resulting in flights being cancelled and planes diverted to Clark especially when it was raining. Our air traffic controllers talk of a “black hole” in Philippines airspace with no one controlling the planes flying through it because the current radar system is grossly inadequate.

The DOTC is aware of the problem and carefully prepared a plan to fix it. It brought in two different sets of independent international consultants. The first team did a feasibility study; the second team then produced a detailed design. The plan calls for DOTC to replace the current 14-year-old air traffic control system, which has only limited functions, with a state-of-the-art new air traffic management system, one that will be as good as that of neighboring countries and allow interoperability with any of them.

The proposed CNS/ATM project is said to meet the strict standards of the International Civil Aviation Organization (ICAO) Global Air Navigation Plan. It is part of a master plan approved by several government agencies, including the National Economic Development Authority (NEDA), DOTC, and Civil Aviation Authority of the Philippines (CAAP).

The DOTC conducted a bidding process last year that resulted in the first part of the project being awarded to a joint venture of Thales Australia and Sumitomo Corp. after the consortium submitted the lowest bid.

But accusations of bias have been leveled against the bidding process, as well as allegations of foreign meddling, specifically against Japan, even though the funding for the project will come from Tokyo’s official development assistance. It is also being alleged that Thales’ predecessor has been blacklisted in the Philippines.

There is also a suggestion that an interim air traffic management system the DOTC has commissioned to be built and used until the CNS/ATM comes online in 2013 should be used indefinitely and the larger project dropped.

This, of course, is fraught with danger. The interim system does not measure up to international standards. It was designed and built locally even though those responsible have no experience or reputation for doing this kind of work. Some pieces of newly installed equipment even came from a decommissioned air traffic management system in the Czech Republic. It is highly doubtful, therefore, that it can do the job until 2013.

The Philippines scores very low in various rankings on civil aviation safety. It is important for the country not to further slide down the rankings and put many lives at risk. All our neighbors use state-of-the-art air traffic control systems. We cannot afford not to upgrade our own to global standards.

NEHA JAIN

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