New tax may hike airline fares

A proposal to levy USD 0.70 cents taxes on air tickets purchased from all airlines in the five partner states of the East African Community has raised fears across the region that the move will keep air transport expensive. The proposal was initiated by Civil Aviation Safety and Security Oversight Agency (Cassoa), a regional aviation body geared at increasing the resource envelop for the aviation industry. Currently, the institution operates on an annual budget of $2.2million (Rwf14.7 billion) contributed by the five partner states of the bloc. However, Cassoa says the budget is inadequate which affects some of their activities like securing some experts. “If the new levy is imposed on the air-tickets, it means we shall also increase flight charges. And who will be affected? it’s the travellers especially business operators,” Deogratias Tonda, the Air Uganda acting manager ground operations said in an interview last week. He emphasised that the operation charges in the region are already high. Apparently aircrafts are charged around $3,200-5,000 as a package for navigation fees, landing and parking depending on the capacity of the aircraft. Tonda warned that airlines will pass the new charges to passengers in form of high flight charges. Air transport costs in the east African region are believed to be the most expensive in the world. For instance, the 45-minute flight by Air-Uganda from Kigali to Entebbe costs $300 (over Rwf200,000) a return ticket compared to between Rwf7,000 and 10,000 by road. The 5th Northern Corridor Integration Projects Summit in May, in Nairobi, Kenya directed line ministries to develop strategies to reduce air travel costs between partner states, but many view the Cassoa proposal as a further hurdle to lowering of flight charges. In Arusha last week, the East African Legislative Assembly (EALA), urged the Council of Ministers to ensure the implementation of the new air-ticket levy proposal among the partner states by engaging Civil Aviation Authorities in EAC partner states. The new levy favours airlines but not passengers, according to observers. Observers suggest member states should look at other alternatives of generating revenue instead of designing new taxes for the aviation sector. Though still a proposal, there is still a huge task to convince the airlines to buy the idea. RwandAir and Kenya Airways declined to comment on the matter when contacted. But John Bosco Kalisa, the country programmes director of TradeMark East Africa (TMEA) said that imposing new charges on air tickets would not be appropriate. “Air transport is still unaffordable in the region; it wouldn’t be ideal, even currently it’s still expensive. What is needed is to reduce the charges in order to attract more travellers,” he noted. Kalisa advised the bloc to focus on exploration of natural resources like gas, oil to raise funding for various organs. However, in an interview yesterday, Barry A.Kashambo the executive director Cassoa said the proposed tax was very low could not have any negative impact on the airlines business. “It’s less than a dollar and I think it would not have any (negative) impact. They will not even realise it and it will help finance our aviation activities,” he said yesterday. He mentioned that if the charges are levied, the aviation body expects to collect $ 3 million over (Rwf2 billion) tax revenue annually which he said was enough to fund the aviation body. While commenting to the recent Northern Corridor heads of state directive to study strategies on reducing the fares, Kashambo observed that the levy has no connection with leader’s directive. Tony Barigye, the Rwanda Civil Aviation Authority communication officer said though the proposed levy is intended to support Cassoa financially, its implementaion requires consensus from all stakeholders for eventual and proper implementation.

National

New tax may hike airline fares