KOTA KINABALU: The Malaysian Association of Tour and Travel Agents (MATTA) is re-appealing to the authorities to reconsider the Goods and Service Tax (GST) treatment on domestic air transportation, particularly for East Malaysia.
Its vice president inbound, Datuk Tan Kok Liang, said this in response to the latest statement made by Royal Malaysian Customs (RMC) to maintain the current policy of GST on domestic air transportation as standard rated.
“Countries like Indonesia and Thailand have exempted Valued Added Tax (VAT) on domestic air transportation, recognising it as essential services for the people and to boost tourism,” said Tan in a statement yesterday.
In responding to the call by Sabah State Tourism, Culture and Environment Minister Datuk Seri Masidi Manjun that the Federal Government reconsiders GST on domestic flights within Sabah and Sarawak, RMC reiterated that it should be maintained.
Tan pointed out “by RMC’s own admission, flights are a necessity in East Malaysia, bringing to focus the pertinent point that such a necessary mode of transport should justify a relook on zero-rating.”
GST division director Datuk Subromaniam Tholasy conceded that domestic flights are essential services for most parts of Sabah and Sarawak, as work has only just started on the Trans Borneo Highway that will take between 10 and 15 years to complete.
Tan said although for most people, flights are not a ‘daily’ mode of transport, the ‘frequency of use’ cannot be the deciding criteria as to whether flights ought to be considered for ‘zero-rating’. Airport taxis and limousines are granted ‘exempt’ status despite the fact that ordinary Malaysians do not travel on a limousine to work on a daily basis.”
“Hence, relegating flights to the ‘non-essential’ list just because they ‘cannot be considered as a daily mode of transport’ appears to be a misplaced statement in light of other transport modalities enjoying preferential GST treatment,” he said.
While East Malaysia certainly welcomes the Trans Borneo Highway (a recently announced proposed network of roads linking Sabah, Sarawak and Brunei) as a step towards improving the transport infrastructure, this project is merely in the early stage. End-consumers will not see the benefits of its deployment until several years down the pipeline. Meanwhile, the real problem on inadequate transport remains in the here and now – as encapsulated by the words of the RMC: “Flights are a necessity in East Malaysia”.
Tan said an interim measure is urgently needed by zero-rating domestic flights now and not sidesteps it by presenting the Trans Borneo Highway as the solution which is only effective 15 years down the road.
“The RMC has raised concerns that granting ‘exempt’ status to domestic flights would cause the airline industry to become mixed suppliers which bring with them administrative difficulties. But such concerns are unfounded as domestic flights can be ‘zero-rated’ instead of ‘exempt’, and would avoid the administrative problems generated by the latter,” he said.
Currently, he said international flights are not ‘exempt’ but ‘zero-rated’. As such, any change in treatment on domestic flights would naturally bring them to be in line with international flights.
“Zero-rating flights for East Malaysia should not be seen as discriminatory when all Malaysians will be able to enjoy such benefit during travel between East and West Malaysia – a move that may boost economic integration.
“Furthermore, the designated areas of Labuan, Langkawi and Tioman are granted ‘no GST’ status which will boost tourism. The same can be done for East Malaysia which has so much to offer Malaysians and international tourists by ‘zero-rating’ flights in these inbound attractions.
“And more importantly, addressing the issue now would quell the chorus of discontent sweeping across Sabah and Sarawak, as domestic flights are essential transport for many places and even critical in remote areas,” he said.