Operators want tax cuts in air transport business

Dar es Salaam. As the marathon parliamentary budget session this year drags on in the nation’s capital city Dodoma, airline operators are hoping that, come Budget Day on June 14 this year – and the new budget for the 2018/19 financial year that commences on July 1 this year will bring relief in the forms of reduced operating costs and improved infrastructure.

As it is, the current operation costs are a burden. These include – but are not limited to – aircraft landing and parking charges, departure and navigation charges, as well as passenger service charges.

Others are insurance charges and a value-added tax (VAT; 18 per cent) on spare parts, fuel and aircraft-leasing.

According to Tanzania Airports Authority (TAA), aircraft landing charges at the airports in Dar es Salaam, Kilimanjaro, Zanzibar and Pemba stand at $5 (about Sh11, 300 at the prevailing exchange rate) for every 1,000kg of aircraft weight.

Parking charges for an aircraft of up to 20,000kg in weight are Sh1, 000 per 12 hours for locally registered airlines – and $5 (about Sh11, 300) for foreign-registered airlines.

Charges for an aircraft of a weight ranging from 20,000kg to 60,000kg is Sh1,000 for six hours, and $5 for local- and foreign-registered airlines respectively.

Most of the air operators in the country have not shown any signs of growth for many years now. This is ostensibly due to the high operating costs that are contributed to by taxes, fees and other charges, says the Fastjet general manager (GM), Derrick Luembe.

As the GM puts it, had the relevant officials in Tanzania “closely looked into the indirect and induced benefits of the industry, they would have had a different approach when imposing taxes, fees and other charges on sectoral operators.

“Cuts in charges is of paramount importance as the players in the aviation industry would then be in a position to provide the quality services and also be able to grow,” Mr Luembe told BusinessWeek.

While figures are not available for now, contribution of the aviation industry to Tanzania’s gross domestic product (GDP) is relatively high, and every effort should be made to enable the industry to grow.

Mr Luembe argued that reduction in levies would be counter-balanced by the provision of additional flights and services.

This would create competitiveness – and passenger fares and freight charges would come down as a direct result, thereby attracting more Tanzanians to fly and airfreight their goods more cheaply and with greater efficiency.

This would also create more jobs – direct and indirect – with the expanded fleets, Mr Lupembe reasoned.

“We would like to have a harmonised budget for FY-2018/19 which takes into consideration the fact that the aviation industry is an economic growth enabler that needs to be assisted in achieving its goals of providing affordable services to people and businesses across the board,” he noted.

It’s the hope of entrepreneurs and other stakeholders that the government shows its appreciation of what the aviation industry is doing for the economy.

But, inordinately-high operational costs are a huge challenge to the sector, says the managing director of the national flag carrier in the business, Air-Tanzania Company Limited (ATCL), Mr Ladislaus Matindi, who spoke to BusinessWeek by telephone.

Noting that airlines the world over must strictly adhere to safety and security regulations, Mr Matindi stressed that doing this is not cheap. Hence the need to cut down on operational costs – doing so not only in the aviation industry, but also in other sectors of the economy...

This would spur productive activities – and, hence, boost economic growth.

“If we are to do business and perform well, then other sectors of the economy should also be performing well so that the Tanzanian people can have money in their pockets to afford the cost of flying,” the ATCL chief contends. The PrecisionAir Company chief executive officer, Ms Sauda Rajab, was quoted as calling upon the government last year “to create conducive operating environments … Multiple charges impede growth of the aviation industry.”

For starters, Ms Rajab proposed immediate removal of the value-added tax on aircraft leasing.