Too late? House moves on foreign carrier tax issue as KLM ends direct flights
House Bill 6022 is passed on 2nd reading but KLM, the only foreign carrier that could benefit from it, has ceased direct flights to Europe already

'BYE KLM. This undated photo shows a KLM Boeing 747-400 taking off at Schipol Airport in Amsterdam, Netherlands. The airline recently ended its decades-long direct flights between Amsterdam and Manila, the last direct flight from a European city to the Philippines. Photo by Capital Photos for KLM

MANILA, Philippines – The House of Representatives approved on 2nd reading a bill exempting international air carriers from 2 taxes that only the Philippines charges.

This development, which was announced on Monday, March 26, came late.

KLM, the remaining airline mounting direct flights to and from Europe, has ceased operating non-stop connection after its executives lobbied hard against these decades-long taxes imposed by the government.

KLM flights from Manila to Amsterdam now have a stop-over in another Asian city, resulting in longer flight hours and, sometimes, expensive fares.  

All other foreign airlines have ceased their direct flights to Europe years ago, also citing the punitive taxes that did not make economic sense for them.

The lack of direct flights to Europe have direct impact on tourist arrivals.

The Aquino government is aiming to attract 10 million tourists every year by 2016 from the current 3.9 million. The number of European tourists to the Philippines have not improved, largely due to lack of direct flights to Manila or alternative airports.

Around 99% of tourists arrive in the Philippines by air, unlike in other Asian destinations where visitors have the option to do land travel.

Punitive taxes

The House Bill 6022 moves to exempt foreign carriers from International the Common Carriers Tax (CCT), which is equivalent to 3% percent of the airline’s gross turnover, and Gross Philippine Billings Tax (GPBT), which is 2% of the gross turnover.

Prior to the plenary approval, the House Committee on Ways and Means  chaired by Iloilo Rep. Isidro Ungab approved the measure in a recent hearing participated in by representatives of the tourism and travel sectors who supported the passage of the bill.
“The DOT extends its support for the enactment of the bill for so long as it provides redress to the current problems being faced by foreign carriers which are integral parts of the tourism sector,” said Tourism Undersecretary Daniel Corpuz in the statement released by the House,

However, Corpuz said the current tax regime hampers the country’s international air transport connectivity which is the most critical infrastructure linking the Philippines to the gross tourism market.

Steven Crowdey, vice chairman of the Board of Airline Representatives (BAR), added that it was very clear to them that there was general agreement between the Senate Committee on Ways and Means, and the tourism and finance departments that the CCT should be removed while there was debate on the GPB.

“We provided a draft amendment that the GPB could be subject to reciprocity. This could be done through exchange of diplomatic notes,” Crowdey said. –

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