NAIROBI, Kenya – Stakeholders in Kenya’s aviation sector are urging Members of Parliament to reconsider the proposed imposition of a 16% Value Added Tax (VAT) on several industry services, warning of negative consequences for the economy and tourism sector.
The services targeted by the VAT include aircraft with an unladen weight between 2,000 kg and 15,000 kg, direction-finding compasses, aircraft spare parts, and services related to aircraft maintenance, leasing, and chartering.
The proposal also extends to air ticketing services supplied by travel agents.
The International Air Transport Association (IATA) presented their case to the National Assembly’s Finance Committee, emphasizing the need to retain the VAT exemptions outlined in the VAT Act of 2013.
They argued that the exemptions have been critical to fostering domestic and regional air travel growth.
“By keeping all aircraft VAT-exempt, domestic travel will increase, leading to higher revenue for the Kenya Revenue Authority (KRA) through air passenger service charges, VAT on hotels, meals, and other tourism-related services,” IATA stated.
They warned that imposing VAT would raise aircraft acquisition and operational costs, deterring investment in the aviation sector.
The Kenya Association of Travel Agents (KATA) echoed these concerns, highlighting the potential ripple effects on Kenya’s tourism value chain.
They noted that the additional VAT could inflate travel costs, impacting the affordability of domestic and international travel and reducing Kenya’s competitiveness as a safari destination compared to countries like South Africa, Botswana, and Tanzania.
“Higher costs in the air travel sector will not only affect operators’ margins but also disrupt the broader tourism ecosystem,” KATA submitted.
They pointed out that air ticketing services by local travel agents are integral to the tourism industry, supporting other stakeholders such as hotels and tour operators.
KATA also raised alarm over the proposed VAT on other tourism-related services, such as entry fees to national parks and locally assembled vehicles designed for tourist transport, stating it could further burden the industry.
The stakeholders called for harmonized tax policies, noting that other African countries have adopted preferential tax frameworks to boost regional travel and tourism.
The services targeted by the VAT include aircraft with an unladen weight between 2,000 kg and 15,000 kg, direction-finding compasses, aircraft spare parts, and services related to aircraft maintenance, leasing, and chartering.
The proposal also extends to air ticketing services supplied by travel agents.
The International Air Transport Association (IATA) presented their case to the National Assembly’s Finance Committee, emphasizing the need to retain the VAT exemptions outlined in the VAT Act of 2013.
They argued that the exemptions have been critical to fostering domestic and regional air travel growth.
“By keeping all aircraft VAT-exempt, domestic travel will increase, leading to higher revenue for the Kenya Revenue Authority (KRA) through air passenger service charges, VAT on hotels, meals, and other tourism-related services,” IATA stated.
They warned that imposing VAT would raise aircraft acquisition and operational costs, deterring investment in the aviation sector.
The Kenya Association of Travel Agents (KATA) echoed these concerns, highlighting the potential ripple effects on Kenya’s tourism value chain.
They noted that the additional VAT could inflate travel costs, impacting the affordability of domestic and international travel and reducing Kenya’s competitiveness as a safari destination compared to countries like South Africa, Botswana, and Tanzania.
“Higher costs in the air travel sector will not only affect operators’ margins but also disrupt the broader tourism ecosystem,” KATA submitted.
They pointed out that air ticketing services by local travel agents are integral to the tourism industry, supporting other stakeholders such as hotels and tour operators.
KATA also raised alarm over the proposed VAT on other tourism-related services, such as entry fees to national parks and locally assembled vehicles designed for tourist transport, stating it could further burden the industry.
The stakeholders called for harmonized tax policies, noting that other African countries have adopted preferential tax frameworks to boost regional travel and tourism.
