Tanzania: Vat Exemption On Air Charters Thrills Operators

THE government decision to grant a value added tax (VAT) exemption on sale and lease of air charters has won the hearts and minds of aviation industry players.

Tabling the 2023/24 budget in Parliament on Thursday, Finance and Planning Minister, Dr Mwigulu Nchemba proposed a VAT exemption on sale and lease of air charters, breathing a collective sigh of relief to the aviation and tourism stakeholders.

“I propose to amend part I of the schedule to the VAT 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 his budget speech.

This means that the government wants to reverse its measure taken in the financial year 2022/23 on supply of air charter services, as it seeks to complement the efforts of reviving tourism industry along with the invaluable move of President Dr Samia Suluhu Hassan of promoting Tanzania as a tourism and investment destination, through the Royal Tour film.

Indeed, Dr Mwigulu said: “The VAT exemption measure intends 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 move, saying it offers 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 for being considerate. Our earnest gratitude goes to the President Dr Samia Suluhu Hassan for her painstaking efforts to create conducive business environment,” Captain Mkumbwa noted.

TAOA Chief Executive Officer, Ms Lathifa Sykes said that 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 scream to buy our argument. As we seek to unlock the full potential of tourism to bring more foreign exchange, we cannot afford to ignore the aviation as it plays a critical role of travel for many tourists” Ms Sykes said.

The TAOA CEO said that when aircraft are affordable, for example through VAT exemption, investing in the aviation sub-sector becomes lucrative.

Through increased investment in the aviation industry, she explained, the basic law of supply and demand suggests airfare becomes affordable.

“This will result in an increase in local and international air travel. The investors will be happy with the profits, enabling the government to generate more income from tax,” Ms Sykes stressed.

TAOA is the member-base association that aims at fostering legal and responsible development of the aviation industry by ensuring safety, efficiency, regularity and economic operations.

It provides a common platform for the promotion of best practices and engages in effective advocacy with the government through responsible authorities.