HOUSE members today welcomed President Aquino’s recent signing of Republic Act No. 10374, which recognizes the principle of reciprocity as basis for the tax relief to foreign carriers and rationalizes other taxes paid by international carriers in the country.
According to the lawmakers, RA 10374 will boost tourism in the Philippines by enhancing the country’s international air transport connectivity which is the most crucial infrastructure linking the country to the gross tourism market.
Rep. Isidro Ungab (3rd District, Davao City), Chairman of the House Committee on Ways and Means, which conducted hearings on House Bill 6022, the basis for RA 10374 along with Senate Bill 3343, said the new law has a direct impact on the operating costs of international airlines that can also benefit the passengers and the tourism industry.
“The basis is reciprocity, which means that if we grant these incentives to a foreign air carrier, the country where the airline originates must also grant the same incentives to our local air carriers if they fly or operate in the said country,” said Ungab, one of the 12 authors of HB 6022.
Rep. Giorgidi Aggabao, (4h District, Isabela), also an author of HB 6022, said the law would ultimately benefit Filipinos, as it will encourage foreign airlines to continue business in the country.
“I am hoping that, in the immediate term, foreign airlines will continue to do business in the country, providing a robust competition to local airlines. Competition drives quality.
Thus in the long term, the law will be most beneficial to all Filipinos,” said Aggabao, a Vice Chairman of the Committee on Ways and Means.
Another author of the measure, Rep. Hermilando Mandanas (2nd District, Batangas) said the law would be “Great for our tourism. It will bring back direct flights to Europe from Manila and back.”
House Bill 6022, approved by the House on third and final reading on May 21, 2012, is also authored by Reps. Rodolfo Albano (1st District, Isabela), Tomas Apacible (1st District, Batangas), Jerry Treñas (Lone District, Iloilo City), Rufus Rodriguez (2nd District, Cagayan de Oro City), Fernando Gonzalez (3rd District, Albay), Luis Villafuerte (3rd District, Camarines Sur), Roger Mercado (Lone District, Southern Leyte), Florencio Miraflores (Lone District, Aklan), and Elmer Panotes (2nd District, Camarines Norte).
Last March 7, 2013, President Aquino signed RA 10374 “An Act Recognizing the Principle of Reciprocity as Basis for the Grant of Income Tax Exemptions to International Carriers and Rationalizing Other Taxes Imposed Thereon by Amending Sections 28(A)(3)(a), 109, 11 and 236 of the National Internal Revenue Code, as Amended, and For Other Purposes.”
It provides that foreign carriers – both air and shipping – are exempted from paying the three percent Common Carriers Tax (CCT) imposed on passenger traffic only. Carriers will also be VAT (value added tax) exempt for the transport of passengers.
The President said the passage of the law will only bring in more traffic, and facilitate connectivity among our countries” and that “everybody wins from our aviation industries, to our tourism industries, to the millions of our peoples who will have greater freedom in planning their trips.”
Once it takes effect, the President said the law will exempt all international and shipping carriers from paying the three percent common carriers tax on receipts and income derived from transporting passengers. The carriers are also exempted from paying tax on the gross revenue derived from the carriage of passengers, cargo, or mail provided that the same exemption is granted by the carrier’s home country to the Philippines.