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DOF wants airlines’ tax perks scrapped

By Chino S. Leyco | Manila Bulletin

Tax incentives being enjoyed by the country’s two major airline companies will be removed once the Department of Finance’s (DOF) proposed tax reform package two is passed into law.

Based on the Comprehensive Tax Reform Program (CTRP) package two submitted to the House of Representatives, the government will start collecting “all applicable taxes” under the national internal revenue code on the operations of Philippines Airlines (PAL) and Cebu Pacific Air once the proposed measure is enacted into law.

Despite the removal of their tax incentives, the DOF wants to keep PAL’s franchise fee at two percent of gross revenues derived from all income sources whether transport or non-transport income.

Cebu Pacific’s franchise fee is proposed by the DOF to be kept at five percent.

Revenues from incoming international passengers, mail, freight, however, will remain not subject to Philippine taxes.

Under the proposed CTRP-2, PAL’s congressional franchise is overhauled, removing several provisions pertaining to the airliner’s exemptions from other taxes, duties, royalties, registration, license and other fees collected by local governments.

The proposal also imposes taxes, duties, charges among others on PAL’s importation of aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel, oil, among others.

PAL will also be required to pay taxes on lease rentals, interest, fees and other charges payable to both local and foreigh lessors. The flag carrier’s leasing operations are subject to taxes under the DOF’s package two proposal.

On Cebu Pacific’s congressional franchise, the catch on clause ensuring that the Gokongwei-led airline company enjoys a level playing field in the industry in terms of tax treatment is removed.

The taxes under the franchise granted to Aboitiz Air Transport Corp. are likewise overhauled by the DOF under its second tax reform proposal.

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