DAVAO CITY (MindaNews/07March) — President Benigno Aquino III signed Thursday Republic Act 10374, the law that gives income tax exemptions to international carriers in the country, which he described as “ultimately a strategic move” even if it means “initial loss of revenue”.
Speaking at the opening ceremony of the Meetings, Incentive Travel, Conventions, Exhibitions and Events conference here, the President said the law will benefit the aviation industry, tourism industry, and the millions of our people who will have greater freedom in planning their lives.
Once the law takes effect, Aquino said, all international carriers will be exempted from paying the 3-percent Common Carriers Tax on receipts and income derived from transporting passengers.
The law, titled “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, 118 and 236 of the National Internal Revenue Code, as amended, and for other purposes” was a consolidation of House Bill 6022 and Senate Bill 3343.
It provides that foreign carriers, both air and shipping, are exempted from paying the Common Carriers Tax imposed on passenger traffic only, and that carriers will also be exempted from paying value-added tax for the transport of passengers.
With the signing of RA 10374, the Department of Tourism expected a capacity growth “as route passenger load factors improve relative to flights to neighboring countries,” which is likely to start in summer 2014 and winter 2014. It noted that the cumulative capacity growth for three years from foreign carriers is at 20 percent average.
The tax relief will aid in the development of the cruise tourism market for the benefit of the secondary tourism destinations and the island economies across the Philippine archipelago, the law briefer said.
It added that the country will get close to achieving 10 million targets in terms of international arrivals, while tourists are expected to contribute about P50 billion in tax revenues resulting from their expenditures by 2016.
Aquino mentioned that by 2016, the country will need 37,000 additional rooms to cope with the influx of arrivals.
He cited that the number of tourist arrivals had increased from 3.1 million in 2009 to 4.3 million in 2012, the first time the country reached a 4-million mark in arrivals. (Lorie Ann Cascaro/MindaNews)