Common carrier’s tax on cargoes up for review

The Department of Finance is reviewing the imposition of common carrier’s tax on cargoes of international airlines and sea vessels after Danish businessmen in the country requested to bring down the rate.

According to a statement released by the DOF, Denmark Minister of Industry, Business and Financial Affairs Brian Mikkelsen had sought a review of the country’s common carrier’s tax on cargoes when he met with Finance Secretary Carlos G. Dominguez III last month.

“This is the one topic that gets us worried. We are very interested to know more about this. Looking at the shipping arena, this is a very global business, therefore it is advisable to have a level playing field,” the DOF quoted Mikkelsen as telling Dominguez during the meeting.
Mikkelsen led a business delegation from Denmark that visited the country last month.

The DOF noted that under Republic Act No. 10378, international air and sea vessels were exempted from the payment of the 3-percent common carrier’s tax slapped on passengers.

However, the law did not exempt cargoes carried by global airlines and ships.

“We are reviewing this and again the goal is to make it fair to everyone and to make it a level playing field for all participating in the business. We are going to review the BIR [Bureau of Internal Revenue] issuances,” the DOF quoted Dominguez as telling the Danish delegation, referring to the earlier revenue regulations issued on RA 10378.

Sought for clarification, Dominguez told reporters that the concern of the Danish businessmen was “the enactment of RA 10378, which declares that gross receipts by international air and shipping carriers are subject to common carrier’s tax and not VAT [value-added tax].”

“They want us to review the common carrier’s tax because they have a lot of cargoes. One of their biggest companies doing business here is Maersk,” Dominguez said, adding that he had the impression that the Danish delegation wanted a lower rate.

“We are studying whether a proposal to modify is in order,” Dominguez said, even as he said that they did not make any promises to the Danish businessmen.

To recall, RA 10378 signed by former President Benigno Aquino III in 2013 granted tax breaks to foreign carriers. Besides VAT exemption, international carriers are also exempted from paying the 2.5-percent gross Philippine billings tax or GPBT, a form of income tax applied to international airlines or shipping companies.