Foreign airlines oppose common carrier tax ruling

FOREIGN AIRLINES have formally expressed their opposition to a Bureau of Internal Revenue (BIR)common carriers tax ruling, saying the policy reinforced the lack of a level playing field.

Revenue Regulations 11-2011, issued on July 20, changed the tax base to actual billing per passenger from average billing. The new regulation also added rental fees, advance payments, penalties and other service charges in the computation of the tax aside from ticket price, excess baggage fees, cargo fees and mail fees.

The Board of Airline Representatives (BAR), which is composed of 30 foreign carriers with Philippines routes, said it "interposes its strong objection to the amendments introduced by RR No. 11-2011" in a July 27 letter to Finance Secretary Cesar V. Purisima.

"[O]ur issue is the discriminatory tax regime - that Philippine air carriers are not subject to the same tax regime in international routes where they operate and compete with foreign carriers," BAR First Vice- Chairman Steven J. Crowdey said in the letter, a copy of which was issued by Air France-KLM yesterday.

Under the National Internal Revenue Code, international air carriers must pay a 5.5% tax on revenues, broken down into a 3% common carrier tax on gross receipts and a 2.5% tax on all cargo and passenger revenues "originating from the Philippines in an uninterrupted flight, irrespective of the place of sale or issue ... of the ticket."

Foreign chambers earlier this week expressed dissatisfaction over the BIR ruling.

Mr. Crowdey, US-based Delta Air Lines, Inc.'s general manager for Australia, Micronesia and the Philippines, said BAR's issue was the "lack of level playing field" as the tax is slapped only on foreign carriers and not local airlines. The industry group asked that implementation of the new BIR regulation be suspended and that it be given a chance to present a position paper.

"The administrative measure will only make the tax computations more complicated and burdensome given the range of itineraries, the various places of issuance of tickets, the complexity of airline pricing," Mr. Crowdey said.

Noting the Aquino administration's recent move to further liberalize the aviation industry via the pocket open skies policy, he said "An enabling business environment will truly make it easier for air carriers to choose the Philippines over other destinations..."

Mr. Purisima was not immediately available for comment but BIR Commissioner Kim Jacinto-Henares, in a phone interview yesterday, said: "they may have that desire but the law is different."

"Not everyone can get what they want," she added.