Airlines to meet Finance Minister over VAT

Representatives of domestic airline operators are scheduled to meet the Minister of Finance for a discussion in the coming weeks over the imposition of 17.5 percent VAT on domestic travel.

Operators contend that the imposition of 17.5 percent VAT in addition to existing taxes will lead to an increase in air fares and deter people from choosing air transport as an option.

They say the new tax, which is not being charged yet, will erode airlines’ ability to raise fares to match rising costs. The three domestic operators therefore petitioned the sector Ministry over the issue.

Mrs. Dzifa Attivor told the B&FT that “We have gone far. We have written letters to the Ministry of Finance over the issue. The last meeting I had with the Deputy Minister of Finance, he indicated that I should invite representatives of the local airlines to have a discussion with officials at the Ministry of Finance. The Ministry of Finance wants to have a discussion with them directly”.

The airlines currently charge a tax of GH¢20 on every ticket price, comprising a GH¢5 airport tax and GH¢15 fuel surcharge.

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.

In 2013, with four airlines -- Antrak, Starbow, Africa World Airlines and Fly540 -- operating flights to Kumasi, Takoradi, Tamale and Sunyani, there was an estimated 40 percent increase in passenger throughput over the 2012 figure of 543,379.

The three domestic airlines currently in operation have evinced that these gains could be eroded with the introduction of the new tax, the airlines warned.

Mr. ApiigyAfenu, the Chief Operating Officer of Africa World Airlines, the domestic and regional carrier, told the B&FT in an earlier interview that “If there had been consultation, maybe a different way could have been found to raise money for government and at the same time promote domestic air transport”.

He added that: “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”.

By Dominick Andoh | B&FT Online | Ghana