Domestic Airlines are worried about the possible effects the revised Value Added Tax (VAT) will have on domestic air travel.
Currently charging GHc20 tax on every ticket price (GHc5 airport tax and GHc15 fuel surcharge), they fear a 17.5 percent VAT on tickets plus existing taxes will discourage people from choosing air transport as a means of travel within the country.
CEO of Starbow, Eric Antwi opined that the tax will see a drop in their number of passengers and negatively affect operators who had already been hard-hit by the depreciating cedi.
“Our expenditure in terms of cedis has almost doubled. The cost of doing business has gone up. We need to get the passengers to be able to break-even…If we charge the 17.5 percent on the price of tickets, the fare will go so high it will deter people from travelling by air,” he said.
Chief Operating Officer of Africa World Airlines, Appigy Afenu insisted that there should have been some form of consultation before imposing such taxes on domestic carriers.
“We know government needs money, they need to raise revenue — but here is a situation where you say you want to grow the domestic aviation industry [and] you want this place to be an aviation hub. These things don’t happen through excessive taxation; and you will not get that effect if you don’t have a viable domestic airline industry……People were getting used to flying by air, and then all of the sudden it’s like we are going backward. I just feel that if there was enough consultation things would have been different.”
He added that the new tax, which is not being charged yet, will ruin the airlines’ ability to raise fares that will match rising costs.
The 2014 budget approved by Parliament reviewed and broadened the application of VAT to cover domestic air travel. The new VAT regime has also seen an increase in the rate from 15 percent — including the National Health Insurance Levy — to 17.5 percent.
Domestic airlines, unhappy about the development, petitioned the Finance Ministry through the Ministry of Transport and are scheduled to meet the Finance Ministry over the petition.