Air operators say VAT exemptions deletion in Finance Bill to impede progress » Capital News
NAIROBI, Kenya May 21- The Kenya Association of Air Operators ((KAAO) now says the proposed deletion of certain Value Added Tax (VAT) exemptions in the 2024 Finance Bill will impede growth and investment in the sector.
According to the association, the bill seeks to eliminate VAT exemptions previously granted to the aviation sector therefore demanding the government to reconsider the move by preserving the exemptions vital for the sector sustaining growth.
“The proposed deletion of these VAT exemptions threatens to undermine the substantial progress achieved in recent years, posing a significant risk to the sector’s sustainability and its contribution to Kenya’s economic growth,” the association stated.
The exemptions targeted for removal include Aeroplanes and other Aircraft on unladen weight exceeding 2,000 kgs but not exceeding 15,000kgs of tariff numbers 8802.30.00, direction-finding compasses, instruments, and appliances for aircraft and Spacecraft including satellites, suborbital and spacecraft launch vehicles of tariff numbers 8802.60.00.
Other exemptions are hiring, leasing, and chartering aircraft, excluding helicopters of tariff numbers 8802.11.00 and 8802.12.00.
“The proposed abolition of VAT exemptions on hiring, leasing, and chartering aircraft poses a significant risk of escalating operational costs thereby impeding the sector’s growth trajectory in maintaining and developing Kenya’s air transport system,” It stated.
The Aviators said the revocation of aircraft VAT exemptions will cause a significant surge in acquisition costs for airlines and operators hence hindering growth in the aviation sector.
The move will also impact air travel and charter services, cargo services, aerial services, unmanned aircraft vehicle (UAV) services, balloon operations, aircraft repair and maintenance and training prices.
“Such a scenario could result in diminished accessibility and affordability of these vital services, impacting sectors reliant on aviation, including tourism, trade, and emergency response,” it added.
Additionally, the removal of exemptions for spacecraft and launch vehicles threatens to stifle investment in space-related endeavors, restricting opportunities for innovation, collaboration and growth.
Both the International Civil Aviation Organization (ICAO) and the East Africa Common External Tariff recommend zero-rated taxes on aviation.
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