Global Policy Forum

ECCP Welcomes P-Noy's 'Open Skies' Policy

European business interests are lobbying Philippine President Benigno Aquino to legislate an "open skies" policy which would bring down "burdensome" aviation taxes. According to the European Chamber of Commerce of the Philippines (ECCP), the current tax regime, the highest in Asia, restrains investment in the tourism sector. The ECCP claims that the Philippines are losing out in economic growth and job creation to other Asian countries, but makes no mention of how the proposed reduction serves their interests.

By Bernie Cahiles-Magkilat

Manila Bulletin
January 13, 2011


European businessmen said the opening of the country's aviation industry by the Aquino administration signals a boom in tourist arrivals and more foreign direct investments in the tourism sector, but warned against burdening the industry with unfair taxes.

In its position paper, the European Chamber of Commerce of the Philippines (ECCP) cited the open skies of the new administration saying that tourism is one of the Sunrise industries recognized in its 'Arangkada' program as one of the big contributors to foreign exchange earnings and employment.

"We welcome the open skies policy of the Aquino administration," the ECCP said in its position paper but warned that the industry's success will not be delivered on a silver platter.

"The Open Skies policy, which will hopefully be confirmed in an Executive Order soon, will not succeed if the international aviation industry will be burdened with excessive and unfair taxes," the ECCP said.

ECCP said that part of the reason why the number of airlines operating in the Philippines has not increased and has in fact declined over the years can be attributed to the unfriendly and grossly onerous tax regime for international airlines in the Philippines.

The current tax regime in place consists of common carriers tax (CCT) of three percent of gross receipts and Gross Philippine Billings (GPB) tax of 2.50 percent of GPB or an aggregate taxation on their gross revenue of 5.50 percent.

These taxes and their pertinent regulations are not consistent with international standards and practices, thus making the Philippines the most expensive investment destination for airlines in the ASEAN region.

And Philippine international carriers are not subject to these types of taxes in the routes where they compete with foreign airlines. This discrimination contravenes the principles of the International Civil Aviation Organization to which the Philippines is a signatory.

The government earns P3.20 billion (approximately $70 million) for charging the international airlines to the Philippines for the CCT and GPB taxes but the continued erosion of foreign and perhaps Philippine carrier flights that support Philippine trade and economic growth will benefit the other Asian economies in terms of business and employment opportunities.


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