BIR addresses issue raised by foreign airlines

MANILA, Philippines - The Bureau of Internal Revenue (BIR) said it has already addressed the problem being raised by foreign carriers on the common carriers tax and that further amendments must be addressed to Congress.

“Whatever we can do administratively we have already done,” Revenue Commissioner Kim Henares said.

She said that the BIR has already made the necessary adjustments and that the law is very clear.

If foreign carriers are still not satisfied with the changes, they should go to Congress and lobby for further amendments.

Earlier, the head of Air France-KLM in the Philippines said government should abolish the common carriers tax and the gross billings on cargo and passenger revenues.

Cees Ursem, country manager of Air France-KLM, earlier said the company is stopping its direct flights between Europe and the Philippines. “Once we stop our flights, it will send a signal that doing business in the Philippines is very difficult and no European carrier will fly to the Philippines.”

The airline announced its decision to stop direct flights because of the government’s insistence on charging a three-percent common carriers tax and a 2.5-percent gross Philippine billings tax on cargo and passenger revenues originating from the country.

The airline is also citing increasing competition from heavily subsidized Middle Eastern competitors.

Competition from Middle Eastern airlines has been displacing European airlines out of the Philippine market, Ursem said.

Henares said the BIR should not be blamed for market conditions.

“It’s a function of the market,” she said.

By April 2012, the airline will stop direct flights to Manila and fly via Hong Kong instead before landing Manila.

Ursem said the “taxes are especially harmful to airlines flying long distances just to reach the Philippines, what with the high cost of aviation fuel.”

The STAR earlier reported that the BIR issued revenue regulation 11-2001 which changed the tax base to actual billing per passenger from average billing.

The Joint Foreign Chambers and Foreign carriers have asked the government to allow foreign carriers to change tax type from percentage tax to zero-rated value added tax (VAT).

“This administrative measure will remove the burden from the common carrier’s tax and provide immediate relief to the international carriers. This will help double the volume of international arrivals and benefit tourism, trade, the goal of job creation and ultimately government revenues,” they said in a letter to President Aquino.

However, Henares said the position of foreign carriers is based on the “erroneous presumption that if foreign carriers were allowed to register as VAT zero-rated, they will be exempted from common carrier’s tax, a percentage tax.”