Jokowi approves incentives for airlines

INDONESIA - JAKARTA. President Joko “Jokowi” Widodo has signed a government regulation that will give fiscal incentives to airlines after all relevant stakeholders in the aviation industry agreed to cost sharing to push airfares down.

Secretary to the Coordinating Economic Minister Susiwijono Moegiarso said the new regulation was an amendment to Government Regulation No. 69/2015 on value-added tax (VAT) exemption related to import and delivery of certain transportation tools and the delivery of services.

“We have completed the fiscal incentive scheme related to airline operation. It has been agreed by the President and it will be released in the next one or two days. It is only an administrative matter,” said Susiwijono as reported by kontan.co.id.

The fiscal incentives include VAT exemption for a number of items related to air transportation such as aircraft maintenance, aircraft leasing from overseas, imports and delivery of airplanes and aircraft components.

Finance Ministry fiscal policy head Suahasil Nazara said the fiscal incentives for airlines were expected to reduce flight operation costs to help airfares go down.

“Of course, the cost structure of airlines is not only related to taxation, but we will help with the taxation component,” he added.

He said the Finance Ministry had initially introduced incentives for airlines through Finance Ministerial Regulation No. 35/2016, aimed at reducing import tax on goods related to aircraft maintenance.

The revision of Government Regulation No. 69/2015 aims to further reduce flight operation costs, push down airfares and also follow international taxation standards.

 “Other countries do not collect VAT from aircraft leasing. It will also help improve the competitiveness of the national airline,” Suahasil added.