Business News of 2014-01-28

Domestic airfares to go up by 17.5 percent

Domestic airfares are to go up by 17.5 percent soon following the implementation of the new amended Value Added Tax (VAT).

Local airlines are one of a number of service providers that have been roped into the VAT net following its amendment.

Consumers of services in the sector prior to the amendment paid only GHC 5 for taxes.

But the imposition of the new VAT rate will see local airfares rising by 17.5 percent.

Citi Business News spoke to Appigy Afenu who is the Chief Operations Manager of one of the local airlines in the country African World Airlines (AWA).

Asked what the impact of the new amended VAT will be on the local aviation industry, he said: “If VAT comes into play, then warm up for a 17.5 percent increase in airlines fares. We think some marginal clients will drop off but we don’t think a lot of people will stop flying but we still don’t think the increase is healthy.”

He clarified that it is necessary for government to increase the tax net “but I think a better way or more prudent way is to increase the passenger tax by say 100 percent that will be GHC 10 instead of the 17.5 percent VAT increment which will be 17.5 percent.”

Domestic flyers are currently charged GHC 5 as airport tax and this is the only tax charged consumers.