July 26, 2011
Foreign Businesses are dissatisfied with a recent Bureau of Internal Revenue (BIR) circular that was supposed to ease the common carriers tax burden of foreign air and shipping lines saying it did not address their concern.
The BIR issued Revenue Regulations No. 11-2011 last July 20, providing that the 3% common carriers' tax should be computed on a more defined base composed of ticket price; rent; penalties; as well as fees on excess baggage, mail, freight, and cargo, etc.
"This means that the tax will be computed based on actual billing as opposed to being computed previously based on average revenues," BIR Commissioner Kim Jacinto-Henares said in a telephone interview yesterday.
Representatives of foreign business groups said yesterday, however that while the latest BIR ruling, provides a clearer basis for the tax, it does not answer their complaint mainly that while the tax covers foreign carriers that operate in the Philippines, it does not cover local carriers that have international operations.
This they argue gives local carriers undue advantage over foreign competitors.
NOT THE SOLUTION
"This does not solve the issue," Henry J. Schumacher, executive vice-president of the European Chamber of Commerce of the
Philippines, said via text yesterday.
"It still does not encourage more airlines to come to the Philippines to boost tourism," he stressed.
"We are still pushing for the scrapping of the common carriers' tax."
A senior officer of the American Chamber of Commerce in the Philippines (AmCham) echoed this position.
"The government's move misses the point and perpetuates the unlevel [sic] playing field between Philippine and foreign carriers," John D. Forbes, AmCham legislative committee chairman, said in a separate text message.
"This decision will not help tourism and seems likely to discourage new airline service into the country by taxing their passengers directly which other governments do not do," he added.
Mr. Forbes added that his chamber was not aware of any stakeholder consultation prior to the issuance of the BIR regulation.
"We ask that the regulation not be implemented until such consultations can be held," he said.
Air France-KLM concurred with the foreign chambers.
"We appreciate the efforts of the government to listen to our comments... to relieve the foreign airlines from the tax which is a big financial burden for all of us," Cees Ursem, general manager of the airline's South China Sea division, said separately via e-mail yesterday.
"But with this proposal, we will not be relieved from this tax burden."
STILL FOR ABOLITION
Mr. Ursem said that while the airline has yet to determine the consequences and impact of the recent BIR regulation, the carrier is still pushing for the abolition of such tax.
"We will keep requesting the government to abolish [the common carriers'] tax in order to make it more attractive for the foreign carriers with their operations to the Philippines," Mr. Ursem said.
"We are in favor of supporting the [Philippine] government in its efforts to increase the number of passengers in adding capacity and attract more competition but this is not the solution we are looking for."
Source: Business World; The Economoy; 26 July 2011