WEDNESDAY June 21, 2023
By Adam Ihucha
The Tranquility News Correspondent, Tanzania
Tanzania is brushing off an old measure to scrap value added tax (VAT) on sale and lease of air charters, as it seeks to stimulate growth of intertwined multi-billion-dollar industries of aviation and tourism.
The VAT on air charters business has been a grave concern for the Tanzania aviation players, saying the tax had been an obstacle for the country to woo investors to unlock the aviation potential and kindle tourism sub-sector.
The two industries that earn the Tanzania economy nearly $2.6 billion in foreign currency annually – under the umbrella of travel – are intrinsically linked, as tourism relies on aviation to bring in visitors, and aviation banks on tourism to generate demand and fill seats.
Tabling the 2023/24 Budget in Parliament in Dodoma on Thursday, the Tanzania’s Finance Minister, Dr Mwigulu Nchemba, promised a law reform to enforce a VAT exemption on sale and lease of air charters, offering a ray of hope to the aviation and tourism players to grow business and leapfrog other sectors of economy.
“I propose to amend part I of the schedule to the Value Added Tax Act, Cap. 148 to include a VAT exemption on sale and lease of aircraft, aircraft engine or parts by a local operator of air transportation,” Dr Mwigulu said in the Budget speech.
This implies that the government wants to undo the measure taken in the Financial Year 2022/23 on supply of air charter services, as it seeks to align with the efforts of reviving tourism industry along with the invaluable move of the Tanzania President, Dr Samia Suluhu Hassan, of promoting the country as a tourism and investment destination, through the Royal Tour film.
Dr Mwigulu said: “The VAT exemption measure intend to support the growth of Aviation industry and reduce business and investment cost.”
The Tanzania Air Operators Association (TAOA) Board Chairman, Captain Maynard Mkumbwa, welcomed the government’s move, saying it offered enormous opportunities for the key economic industry to grow by leaps and bounds.
“This has been our grave concern all along. However, TAOA appreciates the government’s consideration. Our earnest gratitude goes to the President, Dr Samia Suluhu Hassan, for her painstaking efforts of creating conducive business environment,” Captain Mkumbwa noted.
TAOA Chief Executive Officer, Ms Lathifa Sykes said the VAT on air charter services contained a seed of destruction as it had created turbulence and slowed down investments in the aviation industry.
The aviation sub-sector is a key pillar of tourism in Tanzania as it contributes a fair share of foreign currency to the country.
“I’m short of words for the government and parliament to have heeded our outcry. As we seek to unlock the full potential for tourism to bring more foreign exchange, we cannot afford to ignore the aviation, as it plays a critical role of travel to many tourists,” Ms Sykes said.
The TAOA CEO said when aircraft were affordable through VAT exemption, investing in the aviation sub-sector became lucrative.
As the basic law of supply and demand suggests, through increased investment in the aviation industry, airfare became affordable, explained Ms Sykes, adding:
“This will result in an increase in local and international air travel. The investors will be happy with the profits and so will the government generate more income from tax.”
TAOA is a member-based association that aims at fostering legal and responsible development of the aviation industry by ensuring safety, efficiency, regularity and economic operations are in place.
It provides a common platform for the promotion of best practices and it engages in effective advocacy with the government through responsible authoritiesΩ