'VAT Removal On Domestic Airline Tickets Leads to Increase in Passengers'

The removal of the 17.5 per cent Value Added Tax (VAT) on domestic airline tickets has not only led to a reduction in domestic air fares but also an increase in the number of passengers, the Aviation Minister, Cecilia Abena Dapaah has told Parliament.

In response to a question asked yesterday in Parliament in Accra by Adaklu MP, Kwame Agbodza, as to whether the reduction had resulted in a decrease in air travel fares, Ms Dapaah said, the initiative has made domestic travel more affordable.

Madam Dapaah said, domestic air fares from May to November 2017, in the case of Starbow, one of the two operators, reduced from GH¢375 to GH¢315 for Accra-Tamale, and GH¢315 to GH¢265 for Accra-Kumasi and Accra-Takoradi routes.

Likewise, for Africa World Airline (AWA), domestic air fares reduced from within the range of GH¢375-500 to GH¢320-400 for Accra-Tamale and GH¢315-400 to GH¢270-340 for Accra-Kumasi and Accra Takoradi route, she said.

Madam Dapaah said fares were revised periodically by the operators, according to the peak and off-peak seasons, and in November 2017, AWA revised fares for the peak season.

The revised fares, which apply at the time of her presentation, ranged between GH¢285- GH¢395 for the Accra Kumasi route, GH¢335 - GH¢445 for Accra-Tamale and GH¢275 - GH¢365 for Accra-Tamale, she noted.

Speaking to the surge in domestic air travels since the tax was scraped, Madam Dapaah said whiles 2016 recorded 295,278 passengers, 2017 had 323,754, representing 9.64 per cent increase.

The minister said as a result of the near Starbow accident in November 2017, at the Kotoka International Airport, "there is only one domestic operator in the country" and that is AWA.

She said as a result of the monopoly being enjoyed by AWA as the sole domestic carrier, there had been reports of fare increment by AWA.

In reaction to these reports, "we have engaged AWA and the ministry is satisfied from the engagements that air fares have been competitive compared to the period of the inclusion of the 17.5 per cent VAT", Madam Dapaah said.

She added: "Although the current level of air fares is a function of demand and supply, we all know the impact of competition. It is our expectation that with new entrants and an increased choice of operators by the travelling public, the domestic air fares will come down."

The minister assured the House that as a policy, local entrepreneurs and airlines were being encouraged to set up stronger private airlines, to boost the vision of making Ghana the West African regional aviation hub for air travel.

One of the to-be domestic air transporters was Black Stars' captain, Asamoah Gyan's Baby Jet Airlines, among others, which she said was at advanced stages to commence operation.

Government, Madam Dapaah said, would continue to support AWA and the expected new entrants to grow and the result of this envisaged competition in the sector would ensure efficiency in air transport and further lead to competitive pricing.

Government, by Parliamentary approval in April last year scrapped the 17.5 per cent VAT on domestic air travels, so as to encourage aviation transportation to prop up the economy.

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