Olongapo SubicBay BatangGapo Newscenter

Saturday, April 16, 2005

Senator Opposes VAT On Domestic Airlines

Senator Gordon deplored the provision in the Senate’s version of the expanded value-added tax measure to subject domestic airlines to 10% VAT in lieu of the two percent franchise tax of which they are presently charged because it would hamper the flourishing local tourism industry.

“VAT on domestic airlines will hurt the tourism industry,” pronounced Gordon as he explained that the taxes will be handed over to the tourists whom the country is trying to attract. He emphasized that the government has an ongoing campaign to promote domestic tourism because of its being one of the fastest and biggest revenue generator for the country.

Gordon said he would move for reconsideration of the decision to include the phrase “common carriers by air and sea relative to their transport of passengers, goods or cargoes from one airport or place in the Philippines to another airport or place in the Philippines” within the services to be assessed a value added tax under the Senate Bill.

The former Tourism Secretary said that the resulting increase in domestic air and shipping fares brought about by the imposition of the VAT would be a deterrent to potential tourists. This increase in domestic fares, coupled with the influx of budget airlines peddling bargain basement rates for international flights, could derail the slow but steady emergence of our fledgling local airline industry.

“Malaysia and Singapore offer budget tour packages which are fast becoming a trend because of their amazingly low rates which are cheaper than some of our domestic tour packages. As a result, local tourists would rather go to our neighboring countries than in Davao or Cebu. Subjecting domestic airlines to VAT will crumble our tourism industry,” said Gordon.

According to Gordon, schemes adopted by local governments to promote domestic tourism have been reaping success. He cited the Donsol case as an example where the local poverty incidence dramatically raised from 76% to 17% in just a little more than two years and which accelerated from being a fifth into a fourth class municipality. Gordon attributed these developments from the booming tourism industry of the small coastal town which is the home of the world famous whale sharks, locally known as butanding. He said commercial and chartered planes to and from Donsol has made the large influx of tourists in the town possible.

“A thriving tourism industry equates to an increase in the demands for services and products which translate to more job opportunities and more revenue for the government. We should extend support to these tourism-related industries,” asserted Gordon.

Furthermore, the senator added that the increased fares resulting from the imposition of VAT to this sector would also increase commercial costs for the transport of goods throughout the country.

“We intend to raise more revenue for the government but we should seek for measures that will inflict lesser pain for the public. While some industries should be subjected for VAT, we should also look into those which should be spared,” Gordon said.


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