SANGAM

Hefty tax weighs airlines down

SANGAM PRASAIN

KATHMANDU, JUL 11 -

Private airlines operators on Sunday said heavy tax levied by the government in the domestic airline operations since 2002 has made it difficult for the aviation sector to survive.

At an interaction on 'Existing Issues of Nepalese Aviation Sector', here on Sunday, the umbrella organisation of private airline companies, the Airlines Operators Association of Nepal (AOAN), said heavy lease tax, landing charge, parking charge,

navigation charge, housing charge and other taxes levied on this sector has affected the efficiency and services, adversely affecting passengers.

The AOAN has suggested the government consider the issue in the upcoming budget so as to make the sector sustainable in the long run and one that would deliver more efficient and competitive services.

It also suggested the Civil Aviation Authority of Nepal (CAAN), the regulatory body which is preparing to revise the existing airfares, make the revision on a “scientific basis.” The airlines have not revised the airfare since 2006. In 2006, the aviation fuel was Rs. 53 per litre, which now costs over Rs. 75 per litre. 

The airlines are also suffering from extra Value Added Tax As per the VAT Act 1995, airlines are not allowed to raise the tax from passengers. However, the government imposes VAT on every spare part and other materials imported. “This is totally impractical as per the international theory,” said Yog Raj Kandel, general manager of Simrik Air, presenting a paper on 'Existing Issues of Nepalese Aviation Sector'.

According to him, the government's rigid lease tax has also affected the growth of private airline companies.

No aircraft has been leased for the past 7-8 years because of the 10 percent lease tax levied on leasing an aircraft. 

The lease tax was 3 percent before the government revised the Income Tax Act in 2001. The same tax is 1 percent in India. “This clearly shows that the private airline services in Nepal cannot compete with other international airlines,” Kandel said.

Similarly, over 50 percent tax on ground supporting equipment, tools catering equipment and other imported tools has also led to the airlines having to bear a high operating cost. Kishore Thapa, the newly-appointed secretary at the Ministry of Tourism and Civil Aviation (CAAN), said the recommendation made by the AOAN will be discussed.

He said the aviation industry needs to deliver efficient services so as to be awarded tax incentives and other financial packages.

 Rameshwar Thapa, president of AOAN, said Nepali private airlines have started cross-border flights, which is boosting  the aviation industry.