MATTA appeals for exemption of service tax on all domestic air tickets

0

Tan Kok Liang

KOTA KINABALU: The Malaysian Association of Tour and Travel Agents (MATTA) is appealing to the Ministry of Finance for all domestic air tickets be exempted from service tax.

MATTA President Datuk Tan Kok Liang says “The Frequently Asked Questions (FAQ) in the Royal Malaysian Customs Department’s website state that domestic flights on or after 1st September 2018 are subjected to a 6% service tax. Under the previous Tax Model, domestic flights were out scoped to service tax.”

“In response to Finance Minister Lim Guan Eng stating the government is open to receiving public feedback, MATTA is appealing to the Ministry of Finance for all domestic air tickets be exempted from service tax and that the government could collect much more SST from higher spending on other goods and services.”

“Exempting service tax on all domestic air tickets is to ensure other states in Malaysia will also appeal to tourists as holiday destinations. As of now, tourists especially bound for East Malaysia are complaining of high air fares from Kuala Lumpur. How are we to develop smaller towns and states apart from Kuala Lumpur as tourism hubs?”

“Unfortunately, the high costs of air travel especially between the Peninsular and East Malaysia have driven Malaysians to opt for regional travel instead of local holidays. Adding 6% service tax on domestic flights would be a disincentive for ‘flying local’.”

Tan added, “Service tax exemption on all domestic air tickets would benefit the states and the country economy. Domestic tourism is one of the key anchors in the tourism industry and expected to continue its growth trajectory with inbound tourism receipts amounted to RM82.1 billion last year, and domestic tourism RM83.1 billion.”

“The resulting multiplier effects of the service tax exemption would inevitably add to government revenues through enlarged economic activities especially from visits between the Peninsular and Sabah and Sarawak seeking employment, education, medical needs and family commitments. Furthermore, air transportation for many East Malaysian is considered a necessity in view of its geographical landscape and the lack of adequate land transportation.”

“The potential of collecting SST from the entire tourism industry is huge, whereas domestic air tickets constitute only a tiny fraction. Imposing a service tax on domestic tickets could discourage price sensitive tourists from travelling within the country. More so when airfares for international flights are low and not subject to service tax,” concluded Tan.