KATHMANDU, JUNE 15
The International Air Transport Association (IATA), the global trade association for the airline industry, has expressed concern over the provision of charging 13 percent value-added tax (VAT) on air tickets for foreign travel as announced in the government of Nepal's budget for the upcoming fiscal year 2023-24.
Stating that tax burden will make air travel costlier, thereby adversely impacting passengers, airlines and the entire travel and tourism sector, IATA has urged the government to withdraw its decision to impose 13 percent VAT on air tickets for visits abroad.
Additionally, the 13 percent VAT will discriminate against travel agents based in Nepal as it does not apply to tickets bought through travel agents based outside the country, impacting the interests of IATA accredited travel agents in Nepal, a statement issued by the association reads.
"Tourism is Nepal's fourth largest industry by employment and it is imperative that enabling policy measures are adopted so that misdirected taxes do not stymie its growth potential. The heavy burden of 13 percent VAT on outbound air tickets would adversely impact the livelihoods of Nepalis engaged in travel and tourism including travellers, students going abroad for studies, job-seekers and patients travelling to foreign countries for medical treatment. In sum, the tax will extract a heavy social cost in terms of welfare-loss, that would far outweigh the benefits of purported revenue gains," it further reads.
Stating that the decision to impose 13 percent VAT is a retrograde step in the country's attempt at reopening and recovery, the association has requested the government to roll back its decision to increase taxes.
As per National Statistics Office, travel agencies provide 13,223 jobs constituting an employment share of 3.6 percent. Similarly, 3.7 percent of Nepal's GDP is supported by air transport and foreign tourists arriving in country by air. The aviation sector's gross value added contribution to Nepal's GDP stands at $1.1 billion. Also, 455,000 jobs are supported by the air transport sector in the country, as per the statement.
A version of this article appears in the print on June 16, 2023, of The Himalayan Times.
