Aviation Minister – 17.5% tax cut increased domestic air travel

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The Aviation Minister, Cecilia Dapaah, has told parliamentarians that the removal of 17.5 percent VAT on domestic airfares has increased the number of passengers who board domestic flights by 9.64 percent.

According to her, the numbers moved up from some 290,000 to over 320,000 passengers.

The government in its 2017 budget scrapped the VAT on domestic air travel driving down the costs of domestic airfares.

The Minister, while briefing Parliament on Tuesday said the scrapping of the VAT has largely been beneficial.

“…The government pledged and abolished the 17.5% value-added tax on domestic airfares as an incentive to domestic airlines. The removal of the 17.5% VAT not only led to a reduction in domestic airfares but also led to an increase in the number of passengers. For instance, domestic passenger trips from May to December 2017 were 323,754 as against 295,278 passengers for the same period in 2016 representing an increase of 9.64%,” she said.

The Minister further told Parliament that competition in the domestic airspace is expected to increase as new entrants are to expected to join the industry.

“It is our expectation that with new entrants in the pipeline, the domestic airfares would come down. The Ministry continues to engage other operators such as Starbow to ensure a resumption of operation. To this end, local businesses and prospective investors such as Baby Jet airlines among others have advanced plans to commence domestic airline operations,” she added.

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