Aviation breaking news – Kenya considering additional tax on air fares to finance health budget


News have emerged from Nairobi overnight that the Kenyan government plans another financial assault on air passengers, seeking to introduce a tax ‘to pay for HIV treatment’.

The health ministry, responsible for this planned air travel tax atrocity, claims that donor funding is no longer enough to deal with and pay for the treatment of HIV infected patients and a number of related illnesses, and will therefore present a white paper to cabinet soon for broader discussion.

The aviation sector however, upon learning of these plans to use a tax on tickets for ‘alien purposes’ is equally vowing to mobilise and lobby against this latest government scheme to put its hand into the pockets of air travellers.

The budget reading in the UK yesterday in fact deferred the hugely controversial additional tax on tickets for at least 4 years, following advice against such plans from IATA and airlines flying to the United Kingdom, and against the odds – that government too has empty pockets for that matter and much deeper holes to fill – decided the damage done to the aviation sector would be too huge and counterproductive in terms of jobs, expansion plans for aviation facilities and route development and delayed the tax until 2015.

In Kenya however aviation observers are far from sure that their government has the capacity to approach this issue logically and two regular sources commented overnight: ‘with the election coming up next year it is obvious that our government is hell bent to present ‘show cases’ to the electorate no matter where the money for that comes from. Already the cost of implementing the new constitution is almost prohibitive, and cost of administration and in particular parliament and a bloated cabinet unsustainable. There are also constant allegations of corruption in the health sector. The ministry of health should address their internal anomalies and seek out areas where they can save money, and not come to a sector which is at best fragile right now, considering the fuel cost explosion in recent weeks, inflation, global concerns over the economy after the Japan earthquake and tsunami and the fall out of political unrest across North Africa and the Middle East. Taxing passengers even more will most likely kill off growth prospects for the aviation sector and make it unaffordable to fly, therefore it should not be allowed by cabinet’.

The other source, more outspoken, had this to say: ‘What ******* nonsense this is. Has this minister even one clue what the financials for airlines right now are. Cost for fuel is escalating weekly and due to intense competition on domestic routes I expect one or the other go broke anyway or having to merge. You see, if taxes on tickets were to be used for the development of Wilson Airport, of Jomo Kenyatta, Moi International, Malindi, Kisumu etc, at least there would be some justification for it as the proceeds would be invested in aviation infrastructure, maybe even training. But even then our sector might have something to say about it during consultations, but this minister never even consulted us. The entire tourism industry, we are part of it, is being shortchanged by government year after year. KTB is never getting the percentage back of what the sector earns government to increase foreign marketing. Let them start there, let government give the aviation related taxes back to the sector and let other sectors like health root out corruption first, examine their operations like the private sector would be doing, consult widely before taking such rash approaches, before committing day light robbery through ill considered and damaging taxes on other sectors, especially aviation. HIV treatment should be available to all affected but so should be other benefits for tax payers too. The figures in the public domain over the cost of the new constitution, what cabinet costs, what parliament costs, let them take from there and tighten their own belts first before ransacking the airline industry’.

Harsh words but very understandable, considering the razor thin margins especially on the main domestic routes from Nairobi to Mombasa, Malindi and Kisumu, run away aviation fuel prices  and increased competition on the African continents by foreign airlines impacting on the traditional markets of African airlines.

Watch this space.