SEVENTEENTH CONGRESS ) SY ;
REPUBLIC OF THE PHILIPPINES ) [> RECEWED
First Regular Session ) pare, 19 OCT 2016

HOUSE OF REPRESENTATIVES

H.B. No._4156

Introduced by REP. LUISA LLOREN CUARESMA
LONE DISTRICT OF NUEVA VIZCAYA

EXPLANATORY NOTE

‘The Travel and Tourism Competitiveness Report released by the
World Economic Forum at the Global Tourism Forum 2011 held in
Andorra revealed that the Philippines ranked 94% out of the 139
countries in terms of most attractive environments for developing the
travel and tourism industry. This dismal performance can be attributed
to our low ratings in the travel and tourism regulatory framework, as well
as in business environment and infrastructure.

The Board of Airline Representatives (BAR) which represents the
biggest foreign airlines operating in the country considers both the three
percent (3%) Common Carriers Tax (CCT) and the two and a half percent
(2.5%) Gross Philippine Billings Tax (GBP) on all cargo and passenger
revenue originating from the Philippines in an uninterrupted flight,
regardless of the place of sale or issue of ticket as discriminatory taxes
that target the foreign airlines and give undue advantage to local
companies. The Philippines is the only country that charge such taxes
while other Asian countries offer incentives to foreign carriers.

Due to the imposition of these taxes, Air France and the KLM Royal
Dutch Airlines decided to stop flights between Amsterdam and Manila.
This is the last direct link of the Philippines to Europe. Carriers with
extensive global networks had either left the Philippines or shifted
capacity to the benefit of neighboring countries’ tourism and trade.

The International Air Transport Association (IATA) commissioned
Oxford Economics to undertake a study of 54 countries to quantify the
benefits of aviation.

From visiting family and friends to shipping high value products,
27 million passengers and 596,000 tons of freight travel to, from and
within the Philippines. The value placed on these services is likely to
significantly exceed the expenditure. Oxford Economics estimates that
the benefit to travelers is worth around P575 billion and the estimated
benefit to shippers is about P34 billion.


All of these benefits however would be offset by excessive tax
burden on foreign carriers operating in the Philippines. The impact of
taxation on aviation would most adversely impact leisure travelers given
their high sensitivity to changes in price. IATA said the removal of the
CCT and the gross Philippine billings (GPB) would bring down the cost of
international travel to the country by 2.5 percent, and increase the
number of international arrivals by 1.9 percent. Removing the said taxes
also would redound to tourism proceeds of $38 billion to $78 million, as
well as to a $1 billion boost to exports.

In view of the foregoing, immediate passage of this bill is earnestly
sought.

ner GK tien, Rhee CUARESMA


©ON OM BON

SEVENTEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

HB. No, 4156

Introduced by Rep. Luisa Lloren Cuaresma

AN ACT RATIONALIZING THE TAX EXEMPTIONS ON
INTERNATIONAL AIR CARRIERS OPERATING IN THE PHILIPPINES,
AMENDING FOR THE PURPOSE CERTAIN SECTIONS OF THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED

Be it enacted by the Senate and the House of Representatives of the
Philippines assembled:

SECTION L. Section 28 (A) (3) (a) of The National Internal Revenue Code of 1997,
as amended, is hereby further amended to read as follows:

"SEC. 28. Rates of Income Tax on Foreign Corporations. —
"(A) Tax on Resident Foreign Corporations. —

(1) xxx

QQ) xxx

(3) International Carrier. - An international carrier doing business in the
Philippines shall pay a tax of two and one-half percent (2.5%) on its
'Gross Philippine Billings’ as defined hereunder:

"(a) International Air Carrier. - ‘Gross Philippine Billings’ refers to the
amount of gross revenue derived from carriage of persons, excess
baggage, cargo and mail originating from the Philippines in a continuous
and uninterrupted flight, irrespective of the place of sale or issue and the
place of payment of the ticket or passage document: Provided, That
tickets revalidated, exchanged and/or indorsed to another international
airline from part of the Gross Philippine Billings if the passenger boards a
plane in a port or point in the Philippines: Provided, further, That for a
flight which originates from the Philippines, but transshipment of
passenger takes place at any port outside the Philippines on another airline,
only the aliquot portion of the cost of the ticket corresponding to the leg
flown from the Philippines to the point of transshipment shall from part of
Gross Philippine Billings.

"PROVIDED, THAT INTERNATIONAL AIR CARRIERS DOING
BUSINESS IN THE PHILIPPINES SHALL NOT BE LIABLE TO PAY
THE GROSS PHILIPPINE BILLINGS HEREIN PROVIDED
PURSUANT TO THE PRINCIPLE OF RECIPROCITY: PROVIDED,
FURTHER, THAT THE GRANT OF RECIPROCAL EXEMPTIONS TO


INTERNATIONAL AIR CARRIERS SHALL ENTER INTO FORCE
TIURTY (30) DAYS FROM THE EXCHANGE OF DIPLOMATIC
NOTES BETWEEN PHILIPPINESAND THE FOREIGN
JURISDICTION CONCERNED: PROVIDE! INALLY, THAT SAID
DIPLOMATIC NOTES SHALL CONSTITUTE THE AGREEMENT
BETWEEN THE TWO (2) COUNTRIES.

"(b) Xxx.”

"Disbursements from the Fund shall be made solely for the protection,
maintenance, administration, and management of the System, and duly
approved projects endorsed by the PAMBs, in the amounts authorized by the
DENR IN ACCORDANCE WITH EXISTING ACCOUNTING, BUDGETING
AND AUDITING RULES AND REGULATIONS: PROVIDED, FURTHER,
THAT THE FUND SHALL NOT BE USED TO COVER PERSONAL
SERVICES EXPENDITURE."

SECTION 2. Separability Clause. - If any part of this Act is declared invalid or
unconstitutional, such declaration shall not affect the other parts of this Act.

SECTION 3. Repealing Clause. - All laws, acts, presidential decrees, executive
orders, administrative orders, rules and regulations inconsistent herewith or contrary
to the provisions of this Act are deemed amended, modified or repealed accordingly.

SECTION 4, Effectivity Clause. - This Act shall take effect fifteen (15) days after
its publication in the Official Gazelle or in two (2) newspapers of general
circulation.

Approved,