DoF warns of P5-B revenue loss if travel tax is eliminated

ANALYSTS are urging the Philippine government to abolish the "outdated" travel tax, but the Department of Finance (DoF) has warned this could lead to as much as P5.1 billion in revenue losses.

- By Aubrey Rose A. Inosante Reporter

In a statement sent to BusinessWorld, the DoF said it is reviewing Senate Bill (SB) No. 424, which seeks to remove the travel tax imposed on individuals leaving the Philippines via international flights.

"Highly preliminary (estimates show the) removal of travel tax would have cost the government around P5.1 billion in 2023," the DoF said via Viber message on Friday.

"We will be projecting 2025 onwards and the distributional impact," the DoF said.

Senator Alan Peter S. Cayetano, author of SB 424, has estimated P4 billion in foregone revenue from the removal of the travel tax.

However, he expects the government to gain around P299 billion through increased tourism and spending.

The travel tax was first imposed under Republic Act No. 1478 in 1956 and later amended through Presidential Decree No. 1183, issued by then-President Ferdinand E. Marcos in 1977.

The government collects a travel tax of P1,620 ($28.35) from economy air passengers and P2,700 ($47.24) from first class air passengers.

Exempted from paying the travel tax are overseas Filipino workers (OFW), Filipino permanent residents abroad who stayed less than a year in the Philippines, and children aged two years and below.

"Abolishing the travel tax is a bold move, people-first move. It empowers more Filipinos to explore, spend, and stimulate the economy.

We may lose roughly P4 billion in tax, but we stand to gain close to P300 billion in tourism and local business growth. It's a smart tradeoff," Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.