Domestic passenger throughput for the first nine months of this year has increased by 26 percent – from about 136,731 to 184,772 – following abolition of the 17.5 percent Value Added Tax on domestic airfares.
The Deputy Minister of Finance, Kweku Kwarteng, told this to Members of Parliament on the floor of the House in Accra when he was asked a question by the Member of Parliament for Adaklu, Kwame Agbodza, as to how much has been lost so far since abolishing the VAT on domestic air tickets, and the economic impact of the tax-relief.
“In view of the fact that abolishing the VAT on domestic airline fares was implemented from the beginning of 2nd quarter 2017, assessment over a twelve-month period will show even better results,” he explained.
According to the Deputy Minister, the revenue impact of the increase in passenger numbers will have to be assessed from the changes in corporate income tax payments resulting from increased passenger numbers of the domestic airlines and changes in their overall VAT returns.
Other reasons he assigned include: changes in personal income tax of employees; recruitment of additional staff; or whether existing staff are working more hours as a result of the increased passenger numbers.
“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.
“Further, the tax measure will have to be implemented over a longer period before a fair and helpful assessment of its revenue impact can be made,” Mr. Kwarteng said.
The Finance Minister, Ken Ofori-Atta, announced abolition of the 17.5 percent VAT on domestic airfares in the 2017 budget passed by Parliament, and the Value-Added Tax (Amendment) bill was also subsequently passed by the House.
Government is expected to take a GH¢21.11million hit in relation to abolishing VAT on domestic air transport, as it seeks to further grow the industry.
Accra-Kumasi one-way ticket, for instance, has dropped from about GH¢320 to about GH¢250 on both Starbow and Africa World Airlines (AWA).
The minister also stated that government is pleased with the favourable response to the removal of the VAT in the price build-up of domestic airfares. The expansion in economic activities of the airlines resulting from higher passenger numbers, and the potential for job-creation, is exactly what government intended to achieve.
Government’s proposed initiative of establishing a factory in each of the 216 districts in the country has also attracted a lot of potential investors into the country, who are scouting the various regions for viable projects.
These investors travel from the Domestic Terminal in Accra to Takoradi, Kumasi, Sunyani and Tamale for business.