Technicians prepare a Garuda Indonesia plane for a test flight using sustainable aviation fuel on Oct. 27, 2023, at Soekarno-Hatta International Airport in Tangerang, Banten. The plane successfully landed in Adi Sumarmo Airport in Surakarta, Central Java, later that day. - Photo: Antara file
JAKARTA: Tourism and Creative Economy Minister Sandiaga Uno said he agreed with the idea of reducing airline ticket taxes, arguing this could help make ticket prices more affordable for fliers.
Sandiaga said lowering ticket prices could help increase the spending of domestic tourists and that could compensate the loss of potential revenue from taxing airfare.
“The cause of high flight prices is the tax,” Sandiaga said on Tuesday (Aug 6) as quoted by state news agency Antara.
Sandiaga was responding to a proposal coined by the Transportation Policy Agency under the Transportation Ministry that explored ways to lower domestic flight ticket prices.
"So, we have to find a policy mix that can cover the loss of tax revenue from flight tickets while [state revenue] actually increases from the movement of domestic tourists," said Sandiaga.
Domestic flight prices in Indonesia are exorbitant, according to entrepreneurs, and this is impeding the country's tourism industry recovery.
According to Statistics Indonesia (BPS), just 62.55 million people flew domestically last year, which was lower than the pre-pandemic figure of 76.69 million in 2019.
The agency also explored other options to bring down flight ticket prices by introducing new aviation fuel providers in the country, hoping that this can break the monopoly of state-owned oil and gas company Pertamina.
The ministry argued that having more than one aviation fuel provider could incentivise firms to make aviation fuel more competitive and thereby lower the cost for airlines.
Other proposals include streamlining the formula used in determining aviation fuel prices and introducing a flurry of incentives to lower other operational costs of airlines, such as imported spare parts.
The agency also suggests revising the present price ceiling for flight ticket prices, which should account for direct and indirect operational costs incurred by airlines, as well as safety concerns.
The government in mid-July formed a task force to fight high domestic flight ticket prices, which have been a problem since the Covid-19 pandemic.
The task force will include officials from relevant institutions, including the Office of the Coordinating Economic Minister and the Office of the Coordinating Maritime Affairs and Investment Minister.
Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan wrote on his Instagram account on July 11 that the government is considering cutting the value added tax (VAT) for certain destinations to boost air travel.
Additionally, Luhut highlighted the necessity of lifting import duties and restrictions on spare aircraft parts. - The Jakarta Post/ANN
