Government urged to lower 10 percent VAT, upper limit tariff

Government urged to lower 10 percent VAT, upper limit tariff

Jakarta (ANTARA) - The government is urged to decrease the 10 percent value-added tax (VAT) in the tariff for domestic flight tickets as a solution in lowering the price of airline tickets and the upper limit tariff (TBA).   

"Lowering the 10 percent VAT on air fares will be a way out in reducing the prices of flight tickets and TBA," YLKI (Consumer Protection Foundation) Executive  Chairperson Tulus Abadi noted in a statement in Jakarta on Tuesday.

Abadi remarked that the VAT could be steadily lowered to five percent.

"(The VAT) can be lowered, for instance, to only five percent. Hence, the government must act 'fair' to not only suppress the airlines, but it it is not looking to decrease the potential of its revenues, specifically by eliminating or reducing VAT on airline tickets," he explained.

Moreover, Abadi pointed out that the aircraft ticket component was not merely restricted to a matter of TBA but also airport fares (PJP2U) that rose every two years and affected the price of airline tickets since PJP2U has been included in the ticket.

Abadi gauged that the drop in TBA of aircraft by 12-16 percent did not significantly lessen the flight ticket fares.

"Reducing the TBA percentage on paper can certainly lower air fares, but practically, this is not necessarily the case," he pointed out.

Abadi explained that all airlines had applied high tariffs, averaging over 100 percent of the lower limit rates.

"The percentage decline in TBA does not restore the phenomenon of cheap airplane tickets," he emphasized.

In fact, Abadi believes that the decline in TBA percentage can trigger the airline to hoist the remaining percentage of its TBA, for instance, 85 percent.

"This means that air tickets can actually soar after a reduction in TBA. Indeed, after being dismissed, the airline could not increase the tariff to 100 percent, as before it was lowered. However, in essence, the reduction in the TBA percentage will not automatically lower air ticket prices, as expected by the public," he stated.

Abadi remarked that his side was also apprehensive after the transportation minister decreased the TBA, and the airline would also respond unfavorably by closing flight routes that were viewed as not being lucrative or at least reducing the number of flight frequencies.

Hence, YLKI has appealed to the Transportation Ministry to conduct regular evaluation of the TBA formulations, as for the past three years, since 2016, TBA and TBB formulations were never assessed.