Air travel increases by 26% in first nine months
The decision of the government to abolish the Valued Added Tax (VAT) on domestic airline tickets has started paying off, as 184,772 passengers travelled domestically by air in the first nine months of the year.
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This represented an increase of 26 per cent from the 146,831 recorded in the same period last year.
This was disclosed by a deputy Minister of Finance, Mr Kwaku Kwarteng, when he appeared before Parliament to answer questions on the economic impact of the government’s decision to abolish the VAT on the airline tickets so far.
He said considering the fact that the policy was implemented from the beginning of the second quarter of the year, he was confident that the assessment over a 12-month period would even show better results.
Touching on the impact of the increase in passenger numbers on revenue, he said, it would have to be assessed from factors which included changes in the corporate income tax payments, resulting from the increased passenger numbers and the changes in their overall VAT returns.
“Others include the changes in personal income tax of employees if additional staff have been recruited or if existing staff are working more hours as a result of the increased passenger numbers and the changes in the tax payments of businesses whose economic activities may have been impacted positively by the reduced cost of air transportation,” he explained.
“To evaluate the extent of these revenue changes will require more time, more resources and more detailed assessment of many economic actors whose businesses relate directly or indirectly to the operations of our domestic airlines,” he added.
Further, he said, the tax measure would have to be implemented over a longer period before a fair and helpful assessment of its revenue impact can be made.
He added that the government was, however, pleased that the public had responded favourably to the removal of the contribution of VAT to the price build-up of domestic airfares.
“The expansion in the economic activities of the airlines resulting from the higher passenger numbers and the potential for job creation is exactly what the government intended to achieve,” he pointed out.
Background
The Finance Minister, Mr Ken Ofori-Atta, announced some initiatives to boost the aviation sector, including the removal of the 17.5 per cent VAT/NHIL on domestic airline tickets.
Presenting the 2017 budget statement to Parliament, Mr Ofori-Atta said as part of measures to improve the business environment through tax exemptions, the government would abolish the 17.5 per cent VAT/NHIL on domestic airline tickets.
Domestic airlines protested when the 17.5 per VAT/NHIL on domestic air travel was approved by Parliament in December 2013. The increase was transferred to the cost of tickets which affected domestic air travel.
The removal of the VAT, therefore, led to the reduction in the prices of the air tickets and has in turn increased the number of passengers who travel by air. — GB