Neha Jain: http://philippinesaviationnews.blogspot.com/5

1. Bill seeks tax relief for foreign carriers

MANILA, Philippines – The government would 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 percent common carrier’s tax (CCT).

Rep. Hermilando Mandanas (2nd District, Batangas), chairman of the House ways and means committee, 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.

"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," Mandanas said.

GPBT and CCT are perceived to be in contravention of the International Civil Aviation Organization (ICAO) resolution, to which the Philippines is a signatory, on the waiver of taxation on international air transportation. This so far has caused at least four countries to take reciprocal actions against Philippine carriers, said Mandanas.

"The lamentable economic result of such a policy is that it makes other countries like Malaysia and Thailand more attractive to foreign carriers. This in turn provides meager economic opportunities for the country's tourism and export trade sectors as compared to its neighbors in the region."

"Given these considerations, it is high time this inequity be addressed. This would demonstrate our country’s willingness to honor its commitment and obligations and treaties and international agreement it has entered into. Despite the perceived gains of having a vibrant air and sea transport industry, the Philippines has not done much to cultivate a conducive climate for these sectors," Mandanas said.

"An analysis showed that having a more fair treatment with regard to GPBT and CCT on international air carriers alone would mean a potential gain for the revenue-generating efforts of the government in the amount of $38 million to $78 million from rejuvenated tourism, and additional $1 billion on account of boosted export earnings resulting from lower cargo transport costs."

Mandanas filed House Bill 3928 seeking to recognize the tax exemptions under tax treaties and international agreements related to international carriers to which the Philippines is a signatory.

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.

2. Pilot schools to be moved out of 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. Jetstar in talks with local conglomerate for hub

Jose P. de Jesus, secretary of the Department of Transportation and Communications (DoTC), told BusinessWorld in a telephone interview on Friday the Australia-based airline had expressed its intention to establish a local hub either at the Ninoy Aquino International Airport (NAIA) in Pasay or at the Diosdado Macapagal International Airport in Clark, Pampanga.

"They are currently in talks with a local conglomerate. But we are not allowed yet to disclose the entity as the negotiations are still on going. It is still premature," he said.

"The company wants to expand its reach in the region. Jetstar decided to expand operations in the Philippines to increase its flights between other Asian countries," he added.

Mr. De Jesus said the expansion of Jetstar’s Philippine operations would boost competition. "Passengers will have more options. This will boost the tourism industry as well as local commercial aviation," he said.

Early this week, Jetstar said it was set to fly Manila to Darwin, Australia starting Feb. 9 on a thrice-weekly service.

Jetstar Airways, based in Melbourne, Australia, is a subsidiary of Qantas Airways Ltd. The Jetstar group includes wholly owned Qantas subsidiaries operating from Australia and New Zealand, an express ground handling unit, and partner carriers including Jetstar Asia and Valuair in Singapore and Jetstar Pacific in Vietnam.

The carrier currently offers direct connections twice a day to Manila from its Singapore hub. The airline has a local ticketing office in the country.

4.Airline tax hit

THE government will earn an additional income of $78 million from rejuvenated tourism and $1 billion from exports should it exempt international air carriers from paying the Gross Philippine Billings Tax (GPBT) and the 3 percent Common Carrier’s Tax (CCT).

Batangas Rep. Hermilando Mandanas, chairman of the House Committee on Ways and Means, said that 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.