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Thai government faction pressing for more provincial flights in exchange for reduced fuel taxes
November 22nd 2019
Government earns US$99 million a year from aviation fuel excise. Read More »
While international aviation generally prohibits fuel taxes, there is no such restriction for domestic flights. This has boosted Thai government coffers to the tune of three billion baht (US$99 million). Tax revenue grew quickly after the government increased the excise tax on jet fuel over two years from 0.20 baht (less than US$ one cent) per litre to 4.726 baht (US$16 cents).
Thai AirAsia led a request to Thailand’s Finance Ministry on behalf of Nok Air, Bangkok Airways, Thai VietJet Air and Thai Lion Air for a reduction in the fuel excise. The impact of the increased tax on airline operations has been exacerbated by a strengthening baht that has weakened tourism demand. The upside of the rising baht is reduced outgoings for U.S dollar dominated costs such as fuel.
Thai AirAsia shareholder, Tassapon Bijleveld, warned that “if there is no proper solution on the excise tax on jet fuel, some low-cost airlines might have to reduce the size of their operations or even stop flying next year”, the Bangkok Post reported.
A vice minister in the prime minister’s department, Charnkrij Dejvitak, said the excise tax could be reduced for two to three years or lowered in a formula pegged to the exchange rate. But later, excise department director-general, Patchara Anuntasilpa, said he wanted to strike a deal. The tax could be lowered if airlines increased flights to provincial cities with the aim of stimulating tourism, he said. Government and airline representatives are expected to meet within two weeks to continue negotiations about the tax.
