Indonesia's Ministry of Transportation (Kemenhub), through the Transportation Policy Agency (BKT), is currently exploring options to reduce air ticket prices, including the removal of value-added tax (VAT) on air tickets. This move is being considered because air travel is the only mode of transportation subject to VAT, and the removal of the tax is seen as crucial to reducing the high cost of airline tickets.
The Head of BKT Kemenhub, Robby Kurniawan, stated that this proposal came after a study was conducted to find solutions to reduce ticket prices, including discussions with the Indonesia National Air Carriers Association (INACA).
Reduction in Airline Ticket Prices
The elimination of VAT on airline tickets is expected to reduce ticket prices by 9% to 11%. The plan aims to bring air travel in line with other modes of transportation that are not taxed.
Currently, the ticket prices paid by the public include various components such as government taxes, airport fees (30-40% of the ticket price), 11% VAT, Jasa Raharja fees, and a fuel surcharge that will take effect in 2022.
Support from Various Parties
The Minister of Tourism and Creative Economy, Sandiaga Uno, supports the removal of VAT on airline tickets and suggests alternative sources of revenue that do not burden ticket prices, as quoted by Bisnis.com.
The Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, has also suggested reducing jet fuel prices as an alternative. Discussions on reducing air ticket prices are expected to be completed by the end of August 2024.
Robby has held discussions with INACA on ways to reduce ticket prices. According to CNBC Indonesia, in addition to removing VAT and reducing jet fuel prices, they are also considering tax incentives for aircraft spare parts and expanding jet fuel suppliers to reduce costs. This is because jet fuel is one of the main factors influencing ticket prices.
Balancing Hopes and Reality
The chairman of the Indonesian Aviation Service Users Association (APJAP), Alvin Lie, acknowledges that the removal of the 11% VAT on airline tickets could lower ticket prices. However, he believes that this proposal is difficult to implement because VAT contributes significantly to the government budget, which is around IDR 8-10 trillion, as reported by Kompas.com.
Alvin also highlighted the need to address the VAT on jet fuel, which accounts for 11% of the ticket price. Other factors that need to be addressed include the throughput fee for fuel distribution, the non-tax government revenue (PNBP) of 0.25% on airline tickets, and airport cooperation fees with the Indonesian Armed Forces (TNI), all of which affect ticket prices.
